UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


THE  LAW 

RELATING  TO 

AUTOMOBILE  INSURANCE 


BY 

JOHN  SIMPSON 


Selling  Agents 

The  Eastern  Underwriter  Co. 
86  Fulton  Street 

NEW  YORK 
1921 


T 


Copyright  1921 
by  JOHN  SIMPSON 


PREFACE 

The  purpose  of  the  author  in  writing  this  book 
has  been  to  present  the  law  and  fact  of  the  au- 
tomobile insurance  cases  decided  and  reported 
to  date  in  such  a  manner  as  to  make  them  readily 
accessible  to  those  interested  in  the  subject, 
whether  lawyers  or  laymen.  The  essential  facts 
of  the  cases  have  been  stated  in  detail,  and  the 
reasons  of  the  courts  for  their  decisions  have 
been  freely  quoted  from  their  opinions. 

New  York,  July,  1921.  J.  S. 


7797G> 


TABLE  OF  CONTENTS 


PART  I 

Automobile  Insurance  Generally 

CHAPTER  I 
CONSTITUTION  OF  THE  CONTRACT 

§     1.     Introductory 3 

§     2.     Insurable    Interest    3 

§     3.     Oral    Contracts    4 

§     4.     Duration  of  Oral  Agreements  to  Insure 4 

§     5.     Necessity  for  Acceptance  or  Approval  of  Application 5 

§     6.     Assured 's  Knowledge  of  Loss   Before  Risk  Attaches 6 

§     7.     Proposal  and  Counter  Offer — Proof  of  Coverage 6 

§     8.     Agreements  to  Keep  Car  Insured 7 

§     9.     Prior    Negotiations 7 

§  10.     Insured 's  Failure  to  Read  Policy   Immaterial 7 

§  11.    Renewals — New    Car    8 

CHAPTER  II 
CONSTRUCTION  or  POLICY 

§  12.     Where  Policy  Unambiguous 9 

§  13.     Question  of  Ambiguity  Remains  for  Court  of  Appeals 10 

§  14.     Construction  of  Ambiguous  Clauses 11 

§  15.     Practical  Construction   by  Parties 11 

§  16.     One  Form  Not  to  be  Used  to  Aid  Construction  of  Another 12 

§  17.  'Effect  of  Rider 13 

§  18.    Deductible    Clause 13 

CHAPTER  III 
REFORMATION  AND  CANCELLATION 

§  19.     Reformation  of  Policy  for  Mutual  Mistake 14 

§  20.     Same    15 

§  21.     Cancellation  of  Policy — Necessity   for   Surrender 17 

§  21a.  Notice    of    Cancellation 18 

§  22.     Waiver  of  Condition  as  to  Return  of  Premium 18 

§  23.     Waiver  of  Cancellation  Provisions 19 

CHAPTER  IV 
NOTICE  AND  PROOFS  OF  Loss 

§  24.     Necessity  for  Notice  and  Proofs  of  Loss 21 

§  25.     Time  for  Notice  and  Proofs  of  Loss 21 

§  26.     Evidence  of  Receipt  of  Proofs  by  Company 22 

§  27.     Waiver  of  Notice  and  Proofs  of  Loss 23 

§  28.     Question  of  Waiver  for  Jury 24 

CHAPTER  V 
AGENTS,  BROKERS  AND  ADJUSTERS 

§  29.     Authority  of  Local  Agent 25 

§  30.     Limits  of   Agent's   Authority. 26 

§  31.     Agent  for   Disclosed    Principal 27 

§  32.     Agent  for  Undisclosed  Principal , 28 

§  33.     Broker 's  Authority  to  Act  for  Company 29 

§  34.     Adjuster  Cannot  Delegate  Powers 29 

V. 


§  35.     Broker  or  Agent  as  Insured 's  Agent 31 

§  36.     Adjuster's  Authority  to  Admit  Liability 33 

CHAPTEE  VI 
ARBITRATION,   APPRAISAL   AND   AWARD 

§  37.     Waiver  of  Appraisal  by  Denial  of  Liability 35 

§  38.     Effect  of  Award 35 

§  39.     Appraisement  Not  Barred  by  Total  Loss 35 

§  40.     Effect  of  Bad  Faith  of  Appraisers 36 

§  41.     Failure  of  One  Appraiser  to  Sign  Award 36 

§  42.     Effect  of  Refusal  to  Arbitrate 36 

§  42a.  Proceedings    in    Appraisement 37 

§  42b.  Sufficiency    of    Award 37 

CHAPTER  VII 
EXTENT  OF  Loss  AND  OPTION  TO  REPAIR 

§  43.     Expert  Testimony  as  to  Extent  of  Loss 39 

§   44.     Cost    of   Repairs 39 

§  45.     Effect  of   Offer   to   Repair.  .- 41 

§  46.     Time  Within  Which  Offer  is  Available  to  Company 43 

§  47.     Company's  Liability  for  Delay  in  Repairs 44 

§  48.     Evidence   as   to    Repairability 44 

CHAPTER  VIII 
REPRESENTATIONS  AND  WARRANTIES 

§  49.     In   General 46 

§  50.     Representation  made   Warranty 47 

§  51.     Materiality   of   Representations 47 

§  52.     Misrepresentations — Intent    to    Deceive 48 

§  53.     Misrepresentations  as  to  Cost  of  Automobile 50 

§  54.     Misrepresentations  as  to  Price  May  be  Question  for  Jury 51 

§  55.     Knowledge  by  Company's  Agent  of  Cost 52 

§  56.     Misrepresentations  as  to  Year  Model 53 

§  57.     Same — Good  Faith  of  Insured  Immaterial 56 

§  58.     Same — Inspection   by    Company 's    Agent 56 

§  59.     Same — May  be  Question  for  Jury .  57 

§  60      Identification    of    Automobile 60 

§  61.     Renting  and  Hiring  Warranties 60 

§  62.     Same — Warranties  Apply  Both  to  Moitgagor  and  Mortgagee....  62 

§  63.     Same — Occasional  Use  for  Hire  Held  No  Breach 63 

§  64.     Same — Effect  of  Statute  Abolishing  Warranties 64 

§  65.     Same — Violation   for   Jury — Burden   of    Proof 65 

§  66.     Location    of    Automobile — ' '  Private    Garage " 65 

§  67.     Waiver  of  Location  Warranty 67 

§  68.     Misrepresentations  as   to   Other   Insurance 67 

§  69.     Other   Insurance   Does   Not   Necessarily   Forfeit   Policy 68 

§  70.     Misrepresentations  as  to  Ownership 69 

§  71.     Change   of    Ownership 71 

§  72.     Waiver  of  Condition  as  to  Ownership 72 

§  72a.  Incumbrances     73 

CHAPTER  IX 

SUBROGATION 

§  73.     Subrogation  of  Company  to  Owner's  Rights  on  Payment  of  Claim.  74 

§  74.     Same 75 

§  75.     Same 78 

§  76.     Assignment  of  Claims  Under  Policies 79 

VI. 


CHAPTER  X 
ACTIONS  AND  DEFENSES 

§  77.     Voluntary  Settlements  and  Aids  in  Defense 81 

§  78.     Miscellaneous     83 

PART  II 

Matters  Peculiar  to  the  Different  Kinds  of  Automobile  Insurance 

CHAPTER  XI 

FIRE  INSURANCE 

§  79.     Introductory     87 

§  80.     Fire  Originating  Within  the  Car 87 

§  81.     Reporting  Fire  Losses — Dealer's  Policy 88 

§  82.     Care  of  Automobile  by  Insured  After  Damage 91 

§  83.     Valued    Policies    91 

§  84.     Same — Depreciation    in    Value 91 

§  85.     Valued    Policy    Laws 92 

§  86.     Deterioration  in  Value ;  Evidence 95 

§  86a.  Appreciation  in  Value  96 

CHAPTER  XII 

THEFT  INSURANCE 

§  87.     Intent   to   Steal   Necessary 97 

§88.     "Joy   Riding" 98 

§  89.     Intent    Shown 99 

§  90.     Taking  By  Trick  or  Device  Not  Covered 99 

§  91.     Mere   Trespass   Not   Theft 101 

§  92.     Conditional    Sales     101 

§  93.     Special  Contrart  As  to  Conversion — Dealer's  Policy 102 

§  94.     Conversion  by  Bailee  Not   Covered 103 

§  95.     Theft  by  Person  in  Insured 's  Employment 104 

§  96.     Theft  by  Person  in  Insured 's  Household 106 

§  97.     Time  for  Reporting  Loss  by  Theft 107 

§  98.     Theft    of    Equipment 107 

§  99.     Proof    of    Theft 107 

§100.     Cars  Recovered  After   Theft 109 

§101.     Time  Within  Which  Recovered  Car  Must  be  Taken  Back Ill 

§102.     Extent  of  Loss  by  Theft 114 

§103.     Unauthorized   Change  in   Contract 115 

CHAPTER  XIII 
COLLISION  INSURANCE 

§104.     In   General 117 

§105.     Distinction  Between  Collision  and  Accident  Policy 117 

§106.     Collision  "With  Any   Object" 118 

§107.     Upsets   Excluded 120 

§108.     Collision  With  Roadbed  Excluded 123 

§109.     Fall  of  Automobile  Into  Elevator  Shaft  Covered 125 

§110.     Fall  of  Floor  on   Automobile  Not  Covered 126 

§111.     Fall  of  Steam  Shovel  on  Autotruck  Covered 126 

§112.     Violation  of  Law  by  Insured 127 

CHAPTER  XIV 
TRANSPORTATION  INSURANCE 

§113.     "Stranding  or  Sinking" 129 

§114.     < '  Derailment "     131 

VII. 


CHAPTER  XV 

INDEMNITY  INSURANCE  

.     §115.     In  General , 134 

§116.     Bight  to  Issue  Indemnity  Insurance 134 

§117.     Criminal  Prosecutions  Not  Insured  Against 135 

§118.     Use  of  Car  by  Another  Than  Owner  or  His  Servant 136-  - 

§119.     Use  of  Car  by  Member  of  Owner's  Family 137_ 

§120.     Indemnity    Policies    Insuring    Partnerships 137 

§121.     Indemnity   Policies    Insuring    Partners 139 

§122.     Exception  of  Cars  Used  for  Demonstration 140 

§123.     Violation  of  Statute  and  Provision  of  Policy  as  to  Age  of  Driver.  141 

§124.     Violation  of  Speed  Ordinance 144 

§125.     Violation  of  Statute  As  to  Registration 145 

§126.     Actual  Payment  of  Loss  by  Insured;  Liability  or  Indemnity 145  — 

§127.     What  Constitutes  Payment  of  Judgment 147 

§128.     Condition  as  to  Payment  Prohibited  by  Statute 148 

§129.     Voluntary  Payment  by  Insured  Not  Actual  Payment 148 

§130.     Right  of  Person  Injured  to  Sue  Insurance  Company .'...  149—4. 

§131.     "Bodily  Injury"  as  Affecting  Third  Person's  Right  to  Recover.  151 

§132.     Judgment    Against    Insured;    Garnishment 152 

§133.     Aid  by  Insured  in  Defense  of  Negligence  Action 154* — 

§134.     Settlements  by  Insured  Without  Insurer's  Consent 154 

§135.    Effect  of  Insurer's  Refusal  to  Accede  to  Compromise 155 

§136.     Interference  with   Negotiations 156 

§137.     Interference  in  Suits 157 

§138.     Waiver  by  Insurer  of  Defense  by  Assuming  Control  of  Suit 158  ^^. 

§139.     Effect  of  Insurer's  Failure  to  Appeal 159 

§140.     Insurer  Cannot  be  Enjoined  from  Defending  Suit  Against  Assured  160 

§141.     Necessity  for  Notice  to  Insurer  of  Accident 160 

§142.     Time  for  Notice  of  Accident 161 

§143.     Waiver  of  Condition  as  to  Notice  of  Accident 165 

§144.     Amount    of    Recovery 166 

§145.     Same;    Bond  Premium  Not  Covered 167 

§146.     Same;  Insured 's  Costs  After  Insurer's  Failure  to  Defend  Suit...  168 

§147.     Provision  Against  Waiver  of  Conditions  by  Company's  Officers...  168 

§148.     Effect  of  Settlement  by  Insurer  on  Rights  of  Insured 169 

§149.     Effect  of  References  to  Insurance  in  Negligence  Actions 169 

§150.     Same;  Error  Cannot  be  Cured  by  Instructions  to  Jury 172 

§151.     Same;    Defendant  Cannot  Complain  if  Reference  First  Made  by 

Him     : 174 

CHAPTER  XVI 
PUBLIC  SERVICE  VEHICLE  BONDS 
§152.     Requirement  by  Statute  or  Ordinance  of  Bonds  by  Operators  of 

Public  Service  Vehicles  Valid 175 

§153.     Immaterial  that  Bonds  May  be  Beyond  Reach  of  Some  Owners.. .  176 
§154.     Requirement    of    Surety    or    Insurance    Company    Bond  or  Policy 

Valid  ' 176 

§155.     Routing  ' 178 

§156.     Liability  for  Lessee  or  Delegate  Operating  Bus 179 

§157.    Extent  of  Surety 's  Liability. , 180 

TABLE  OF  CASES 183 

INDEX    193 

VIII. 


PART  I 
AUTOMOBILE  INSURANCE  GENERALLY 


CHAPTER  I. 

Constitution  of  the  Contract 

§  1.  Introductory. 

§  2.  Insurable  Interest. 

§  3.  Oral  Contracts. 

§  4.  Duration  of  Oral  Agreements  to  Insure. 

§  5.  Necessity  for  Acceptance  or  Approval  of  Application. 

§  6.  Assured's  Knowledge  of  Loss  Before  Risk  Attaches. 

§  7.  Proposal  and  Counter  Offer — Proof  of  Coverage. 

§  8.  Agreements  to  Keep  Car  Insured. 

§  9.  Prior  Negotiations. 

§  11.  Renewals — New  Car. 

§  10.  Insured's  Failure  to  Read  Policy  Immaterial. 

§  1.  Introductory. — Part  I  deals  with  the  general  principles 
of  insurance  law  as  these  have  been  applied  in  automobile  in- 
surance cases.  Part  II  deals  with  matters  peculiar  to  the 
various  kinds  of  automobile  insurance,  fire,  theft,  collision, 
transportation  and  indemnity. 

§  2.  Insurable  Interest. — A  policy  to  one  who  has  no  inter- 
est in  the  automobile  purporting  to  be  insured  is  void,  and 
an  assignment  to  the  owner  of  an  automobile  of  a  policy 
issued  by  mistake  to  a  previous  owner  of  the  car  transfers 
nothing.  O'Neill  v.  Queen  Insurance  Co.  of  America  (1918) 
230  Mass.  269,  119  N.  E.  678;  Mowles  v.  Boston  Insurance 
Co.  (1917)  226  Mass.  426,  115  N.  E.  666.  If  an  insurance 
company  issues  an  automobile  fire  and  theft  policy  to  a  per- 
son who  does  not  own  the  car  and  has  no  insurable  interest 
in  it  and  afterwards,  through  an  agent,  agrees  orally  to  sub- 
stitute in  the  policy  the  name  of  the  owner  of  the  car  in 
place  of  the  name  of  the  person  to  whom  it  was  issued,  this 
gives  the  owner,  in  case  of  loss  by  theft  and  subsequent  fire, 
no  right  to  bring  an  action  on  the  policy,  because  the  policy 
originally  was  void  and  its  transfer  could  give  no  right;  and 
the  oral  agreement  to  substitute  the  name  of  the  owner  was 


4  AUTOMOBILE  INSURANCE  LAW 

without  consideration  and  did  not  create  a  new  and  inde- 
pendent contract  of  insurance.  O'Neill  v.  Queen  Insurance 
Co.  of  America  (1918)  230  Mass.  269,  119  N.  E.  678. 

§  3.  Oral  Contracts. — Oral  contracts  of  automobile  insur- 
ance are  legal  and  binding;  Sheridan  v.  Massachusetts  Fire 
&  Marine  Ins.  Co.  (1918)  233  Mass.  479,  124  N.  E.  249;  Cass 
v.  Lord,  (1920)— Mass.— 128  N.  E.  716;  Mowles  v.  Boston  In- 
surance Co.,  (1917)  226  Mass.  426,  115  N.  E.  666.  But  to  be 
valid  and  enforceable  the  contract  must  be  mutually  binding 
and  supported  by  a  consideration.  Cass  v.  Lord  (1920) — Mass. 
— 128  N.  E.  716;  O'Neill  v.  Queen  Insurance  Co.  of  America 
(1918)  230  Mass.  269,  119  N.  E.  678.  An  agreement  by  the 
insurance  company's  agents  to  change  the  name  of  the  in- 
sured, assuming  they  had  authority  to  make  the  change,  was 
held  to  be  at  most  only  a  voluntary  undertaking  on  the  part 
of  the  insurance  company  and  did  not  create  a  new  and 
independent  contract  of  insurance;  the  agreement,  properly 
construed,  plainly  contemplated  the  delivery  either  of  a  new 
policy  or  the  issuance  of  a  rider  in  connection  with  the 
original.  O'Neill  v.  Queen  Insurance  Co.  of  America  (1918) 
230  Mass.  269,  119  N.  E.  678.  It  is  the  duty  of  the  owner 
of  the  automobile,  within  a  reasonable  time,  to  take  some 
steps  to  ascertain  whether  the  oral  contract  has  ripened  into 
a  formal  contract  of  insurance.  O'Neill  v.  Queen  Insurance 
Co.  of  America  (1918)  230  Mass.  269,  119  N.  E.  678.  In 
Mowles  v.  Boston  Insurance  Co.  it  was  said  that  "The  oral 
contract  to  'cover'  means  insurance  for  a  reasonable  time 
under  all  the  circumstances  *  *  *  it  is  manifest  that  a  con- 
tract to  cover  cannot  extend  beyond  the  time  when  a  policy 
of  insurance  is  delivered  in  apparent  compliance  with  the 
contract."  Mowles  v.  Boston  Insurance  Co.,  (1917)  226 
Mass.  426,  115  N.  E.  666. 

§  4.  Duration  of  Oral  Agreement  to  Insure. — A  fire  policy 
was  issued  by  mistake  in  the  name  of  a  previous  owner  of 
the  automobile.  The  owner  called  the  agent's  attention  to 
this;  the  agent  told  the  owner  "not  to  worry,  that  it  was 


CONSTITUTION  OF  THE  CONTRACT  5 

covered,"  took  the  policy,  got  an  assignment  of  it  to  the 
owner  and  the  assent  of  the  insurance  company  thereto  and 
some  weeks  later  returned  it  to  the  owner,  who  accepted  it. 
A  month  later  the  automobile  was  destroyed  by  fire.  The 
owner  sued  the  insurance  company,  alleging  that  the  com- 
pany made  an  oral  contract  with  the  plaintiff  to  issue  a  valid 
policy  of  insurance  against  fire  on  the  automobile,  and  that  it 
had  failed  to  issue  such  a  policy.  It  was  not  contended  that 
there  could  be  recovery  on  the  policy,  because,  since  the  as- 
signor of  it  had  no  interest  in  the  automobile  on  the  date 
of  the  policy  or  at  any  time  thereafter,  the  policy  was  void 
and  the  assignment  transferred  nothing  to  the  plaintiff.  It 
was  held  that  the  owner  could  not  recover  upon  an  oral 
agreement  to  insure,  because  such  oral  agreement  expired 
when  the  owner  accepted  the  policy,  and  also  because  an 
agreement  to  "cover"  the  owner  remains  in  force  only  for 
a  reasonable  time  after  the  acceptance  of  the  policy,  and 
such  reasonable  time  had  expired  before  the  fire.  Mowles 
v.  Boston  Insurance  Co.  (1917)  226  Mass.  426,  115  N.  E.  666. 

§  5.     Necessity  for  Acceptance  or  Approval  of  Application. 

— An  application  for  automobile  insurance  is  not  itself  a  con- 
tract, but  is  merely  a  proposal,  which  requires  acceptance  by 
the  insurance  company  through  someone  actually  or  ap- 
parently authorized  to  accept  it,  to  give  it  effect  as  a  con- 
tract. Where  an  application  for  insurance  provides  that  the 
policy  shall  take  effect  on  the  day  the  application  is  ap- 
proved, if  it  is  not  approved,  there  is  no  contract  of  insur- 
ance. When,  however,  such  application  is  approved  by  the 
company,  the  insurance  thus  applied  for  and  paid  for  becomes 
effective,  constituting  a  contract  which  neither  party  can 
change  without  the  consent  of  the  other.  The  insertion  by 
the  company  of  a  restrictive  clause  in  the  copy  of  the  appli- 
cation embodied  in  the  policy  thereafter  issued,  without  the 
knowledge  and  consent  of  the  insured,  is  held  to  be  a  wrong- 
ful act,  and  the  insured  is  justified  in  repudiating  it  and  in- 


sisting  upon  payment  of  the  insurance  in  accordance  with  the 
agreement.  Johnson  v.  Home  Mutual  Insurance  Co.  (1921)— 
Iowa— 181  N.  W.  244. 

§6.     Insured's  Knowledge  of  Loss  Before  Risk  Attaches. 

— Where  the  loss  of  an  automobile,  occurring  before  the 
risk  attaches,  is  known  only  to  the  applicant,  a  policy  subse- 
quently obtained  by  him  without  disclosing  the  fact  of  loss 
is  void,  even  though  the  policy  be  given  a  date  prior  to  the 
loss.  Palmer  v.  Bull  Dog  Auto  Ins.  Assn.  (1920)  294  111.  287, 
128  N.  E.  499. 

§  7.     Proposal  and  Counter  Offer — Proof  of  Coverage. — In 

order  to  constitute  the  contract  the  minds  of  the  parties 
must  meet  on  the  same  proposition.  And  where  an  insurer's 
counter  offer  to  a  proposal  for  insurance  embodied  in 
a  policy  and  covering  notes  sent  to  brokers,  was  not 
accepted  by  the  owner,  the  owner's  payment  of  a  pre- 
mium would  confer  no  rights,  except  the  right  to  re- 
cover the  payment  as  for  money  had  and  received.  Where 
insurance  brokers,  who  had  never  done  business  with  the  in- 
surance company  before,  sent  it  a  copy  of  a  letter  the  brok- 
ers had  written  to  an  automobile  owner,  stating  that  his  car 
was  covered  pending  receipt  of  covering  notes  from  the  in- 
surance company,  the  company  was  justified  in  treating  the 
copy  sent  them  as  a  proposal  to  take  insurance;  and  since, 
in  view  of  the  requirements  of  the  Oregon  standard  policy 
law  (Laws  1911,  p.  279),  it  could  not  be  presumed  that  the 
insurance  company  violated  the  law  and  assented  to  the  copy 
of  a  letter  as  an  insurance  contract,  a  policy  and  covering 
note  which  it  sent  in  reply  amounted  simply  to  a  counter 
proposition,  which  would  not  give  rise  to  a  contract,  unless 
accepted.  Cranston  v.  California  Insurance  Co.  (1919)  94 
Or.  369,  185  Pac.  292.  Whether  there  is  a  meeting  of  the 
minds,  so  as  to  constitute  an  agreement  to  insure  may  be 
a  question  of  fact  for  the  jury.  Fodor  v.  National  Liberty 
Ins.  Co.  of  America,  (1919)  175  N.  Y.  Supp.  112. 


CONSTITUTION  OF  THE  CONTRACT  7 

§  8.  Agreements  to  Keep  Car  Insured. — An  agreement  by 
the  seller  of  an  automobile  to  keep  the  buyer  protected  by 
liability  insurance  while  using  a  car  temporarily  furnished 
him  pending  delivery  of  the  car  ordered  is  not  void  as  against 
public  policy.  The  seller  of  a  Waverly  electric  car  took  in 
part  payment  a  Stearns  car,  the  buyer  turning  over  to  the 
seller  a  liability  policy  on  the  Stearns  car,  and  in  considera- 
tion thereof  and  of  the  order  for  the  Waverly,  the  seller  oral- 
ly agreed  to  keep  in  force,  to  cover  the  buyer,  a  policy  of 
liability  insurance  on  a  car  which  was  given  to  him  to  use 
until  the  Waverly  was  ready  for  delivery.  An  accident 
happened  while  the  buyer  was  using  the  temporary  car,  and 
a  judgment  was  recovered  against  him.  It  was  held  that  he 
could  recover  the  amount  thereof  from  the  seller  under  the 
oral  agreement  to  keep  him  insured.  Ford  v.  Stevens  Motor 
Car  Co.  (Mo.  App.  1920)  220  S.  W.  980. 

§  9.  Prior  Negotiations. — The  policy  is  a  complete  instru- 
ment. It  cannot  be  varied  or  modified  by  prior  negotiations 
between  the  insured  and  the  insurance  company's  general 
agents,  or  overcome  by  invoking  the  aid  of  the  doctrines  of 
waiver  and  estoppel  based  on  his  interviews  at  any  time 
with  the  company's  agents  after  he  received  and  accepted  the 
policy.  Preliminary  conversations  between  the  insured  and 
the  general  agents  before  he  ordered  a  fire  policy  and  con- 
versations after  the  issuance  and  before  the  fire,  as  well  as 
conversations  following  the  fire,  are  therefore  held  rightly 
excluded  in  an  action  on  the  policy.  Cass  v.  American  Cen- 
tral Ins.  Co.  (1920)— Mass.— 128  N.  E.  716. 

§  10.     Insured's  Failure  to  Read  Policy  Immaterial. — It  is 

of  no  consequence  that  an  insured  did  not  read  a  fire  policy 
delivered  to  him,  or  the  accompanying  rider  or  riders,  or 
"know  a  single  condition  in  it,"  but  accepted  and  kept  it  in 
his  safe  until  the  fire.  He  is  bound  by  the  contract  into 
which  he  voluntarily  entered.  Cass  v.  American  Central 
Ins.  Co.  (1920)— Mass.— 128  N.  E.  716. 


8  AUTOMOBILE  INSURANCE  LAW 

§11.  Renewals — New  Car. — A  renewal  of  a  policy  is,  in 
effect,  a  new  contract  of  insurance,  being,  unless  otherwise 
expressed,  on  the  same  terms  and  conditions  as  were  con- 
tained in  the  original  policy.  Palmer  v.  Bull  Dog  Ins.  Assn. 
(1920)  249  111.  287,  128  N.  E.  499.  Where  a  theft  policy  with 
a  mutual  insurance  company  provides  that  if  the  insured  car 
is  disposed  of  and  another  purchased  the  owner,  to  insure 
the  new  car,  must  give  the  company  notice  and  pay  a  fee 
"when  a  contract,  to  be  attached,  to  the  subscriber's  certifi- 
cate, will  be  issued"  if  the  new  automobile  is  approved  by  the 
insurer,  the  insurance  on  the  new  car  does  not  relate  back 
to  the  time  the  application  was  made,  and  if  the  new  car  is 
stolen  before  the  application  is  approved  there  can  be  no 
recovery.  The  owner  of  an  automobile  covered  by  a  theft 
policy  containing  such  a  provision  sold  the  car  and  purchased 
a  new  one  in  June  1917.  On  August  7,  1917,  about  3  o'clock 
he  mailed  a  request  to  the  insurance  company  to  trans- 
fer the  policy  to  the  new  car.  Between  7  and  9  p.  m.  on 
the  same  day  the  car  was  stolen.  On  August  8  the  transfer 
was  approved  and  mailed  to  the  insured.  In  an  action  on  the 
policy  it  was  held  that  there  was  no  liability  since  the  risk 
could  not  have  attached  to  the  new  automobile  until  the 
application  had  been  accepted  on  August  8  and  that  was  after 
the  car  had  been  stolen.  Palmer  v.  Bull  Dog  Auto  Ins. 
Assn.  (1920),  294  111.  287,  128  N.  E;  499. 


CHAPTER  II. 

Construction  of  Policy 

§  12.  Where  Policy  Unambiguous. 

§  13.  Question  of  Ambiguity  Remains  for  Court  of  Appeals. 

§  14.  Construction  of  Ambiguous  Clauses. 

15.  Practical  Construction  by  Parties. 

§  16.  One  Form  Not  to  be  Used  to  Aid  Construction  of  Another. 

§  17.  Effect  of  Rider. 

§  18.  Deductible  Clause. 

§  12.  Where  Policy  Unambiguous. — Contracts  of  automo- 
bile insurance,  like  other  contracts,  are  to  be  construed  ac- 
cording to  the  sense  and  meaning  of  the  terms  which  the 
parties  have  used,  and  if  they  are  clear  and  unambiguous, 
the  terms  are  to  be  taken  in  their  plain  and  proper  sense. 
McClung  (to  use  Union  Casualty  Insurance  Co.)  v.  Pennsyl- 
vania Taximeter  Cab  Co.,  (1916)  25  Pa.  Dist.  583 ;  Crowell  v. 
Maryland  Motor  Car  Insurance  Co.,  (1915)  169  N.  C.  35. 
While  it  is  true  that  insurance  contracts  should  be  construed 
most  strongly  against  the  insurer,  yet  they  are  subject  to 
the  same  rules  of  construction  applied  to  the  language  of 
any  other  contract.  It  is  a  fundamental  rule  that  the  lan- 
guage of  a  contract  is  to  be  accorded  its  popular  and  usual 
significance.  It  is  not  permissible  to  impute  an  unusual 
meaning  to  language  used  in  a  contract  of  insurance  any 
more  than  to  the  language  of  any  other  contract.  Bell  v. 
American  Insurance  Co.  (1921)— Wis.— 181  N.  W.  733.  Where 
there  is  no  ambiguity  in  the  terms  of  an  insurance  contract, 
neither  party  can  be  favored  in  its  construction,  and  if  the 
stipulations  are  such  as  the  parties  might  lawfully  make,  it 
is  the  duty  of  the  court  to  enforce  them.  Dimmick  v.  Aetna 
Insurance  Co.  (1919)  213  111.  App.  467;  Wampler  v.  British 
Empire  Underwriters  Agency  (1920)  54  Dominion  L.  R.  657. 


10  AUTOMOBILE  INSURANCE  LAW 

A  clause  in  a  fire  policy  in  favor  of  a  dealer,  declaring  the 
policy  "to  attach  and  cover  upon  automobiles,  chassis,  tops 
or  other  equipment,  while  attached  to  and  a  part  of  auto- 
mobiles owned  by  the  assured  and  held  by  him  for  sale," 
until  the  time  of  delivery  to  the  purchaser,  is  not  ambiguous 
and  open  to  explanation,  and  it  is  not  necessary,  therefore, 
that  the  understanding  of  the  parties  as  to  the  character  of 
the  property  actually  covered  or  to  be  covered  should  be 
passed  upon  by  the  jury  in  an  action  on  the  policy.  The 
words  are  to  receive  their  ordinary  meaning;  and  the  auto- 
mobiles could  not  be  classified  thereunder  as  comprising  "new 
cars,  second-hand  cars  and  junk  cars,"  some  of  which  it  was 
mutually  understood  the  plaintiff  did  not  intend  to  insure. 
Cass  v.  American  Ins.  Co.  (1920)— Mass.— 128  N.  E.  716. 

§  13.  Question  of  Ambiguity  Remains  for  Court  of  Ap- 
peals.— If  the  terms  of  the  policy  are  unambiguous,  its  con- 
struction is  a  question  of  law  for  the  court.  This  question, 
the  New  York  Court  of  Appeals  holds,  survives  the  unani- 
mous decision  of  the  Appellate  Division  and  is  subject  to 
review  by  the  Court  of  Appeals,  which  also  decides  the  ques- 
tion as  to  ambiguity.  The  court  said:  "The  fact  that  the 
courts  below  have  read  the  policy  otherwise  and  found  it 
susceptible  of  another  meaning  is  urged  as  establishing  the 
fact  that  reasonable  and  intelligent  men  may  honestly  differ 
as  to  its  meaning,  and  that  it  must,  therefore,  be  construed 
against  the  insurer.  It  is,  however,  for  this  court  to  say,  as 
matter  of  law,  whether  reasonable  men  may  reasonably  dif- 
fer as  to  such  meaning,  or  whether  the  indulgence  of  the 
lower  courts  has  not  written  a  new  contract  for  the  parties 
and  extended  the  defendant's  liability  beyond  the  plain  and 
unambiguous  language  of  the  policy.  As  a  legal  proposition, 
we  must  first  find  that  the  contract  is  ambiguous,  before  we 
may  apply  the  rules  governing  the  construction  of  ambigu- 
ous contracts."  Hartigan  v.  Casualty  Co.  of  America,  (1919) 
227  N.,  Y.,  175,  124  N.  E.  789,  reversing  178  App.  Div.  942, 
165  N.  Y.  Supp.  894,  which  affirmed  161  N.  Y.  Supp.  145. 


CONSTRUCTION  OF  POLICY  11 

§  14.  Construction  of  Ambiguous  Clauses. — The  general 
rule  that  a  condition  in  a  policy  of  insurance,  being  the  lan- 
guage of  the  company,  must,  if  there  by  any  ambiguity  in 
it,  be  taken  most  strongly  against  the  company,  is  followed 
in  the  construction  of  an  automobile  insurance  policy;  if 
reasonably  susceptible  of  two  interpretations  it  is  to  be  con- 
strued in  favor  of  the  assured,  so  as  not  to  defeat  without 
plain  necessity  the  claim  to  indemnity  which  it  was  the  ob- 
ject to  secure.  Utterback-Gleason  Co.  v.  Standard  Ace.  Ins. 
Co.  of  Detroit,  (1920)  179  N.  Y.  Supp.  836;  Crowell  v.  Mary- 
land Motor  Car  Insurance  Co.  (1915)  169  N.  C.  35;  Kunkle 
v.  Union  Casualty  Co.  (1916)  62  Pennsylvania  Superior  Ct. 
114.  But  this  rule  is  not  carried  to  the  extent  of  construing 
the  policy  contrary  to  its  manifest  intention  and  express 
condition.  Marmon  Chicago  Co.  v.  Heath,  (1917)  205  111. 
App.  605. 

§  15.  Practical  Construction  by  Parties. — In  construing 
a  policy  resort  can  only  be  made  to  its  practical  construction 
by  the  parties  thereto  where  there  is  some  degree  of  ob- 
scurity or  doubt  in  the  language  employed.  Evidence  of  the 
practical  construction  placed  upon  the  policy  by  the  parties 
was  held  admissible  where  the  policy  contained  a  provision 
which  exempted  the  insurer  from  liability  where  the  injury 
occurs  while  the  car  mentioned  in  the  policy  was  "being 
driven  by  any  person  under  sixteen  years  of  age,"  or  while 
such  car  "is  being  used  for  any  other  purpose  than  that 
specified  in  the  schedule."  The  court  said:  "The  schedule 
referred  to  describes  the  permissible  use  of  the  car  as  being 
'fo.r  business  calls  and  pleasure.'  Does  the  exemption  of  the 
insurer  where  the  driver  is  under  sixteen  years  of  age  imply 
an  admitted  liability  where  the  driver  is  a  member  of  the 
family  of  the  insured  over  sixteen  years  of  age?  Again,  the 
limitation  of  the  use  of  the  car  to  'business  calls  and  pleas- 
ure' is  very  general  and  indefinite,  if  not  elastic,  and  affords  a 
very  appropriate  instance  for  considering  the  attitude  and 
conduct  of  the  insurer  with  reference  thereto.  Are  the  'busi- 


12  AUTOMOBILE  INSURANCE  LAW 

ness  calls'  mentioned  those  strictly  personal  to  the  owner, 
or  do  they  include  those  of  his  wife  and  children  and  mem- 
bers of  his  family?  Is  the  use  of  the  car  for  'pleasure'  a 
use  for  his  pleasure  alone,  or  does  it  include  use  by  members 
of  his  family  over  sixteen  years  of  age  for  their  pleasure, 
or  for  the  pleasure  of  their  guests  and  friends  to  whom  they 
extend  the  ordinary  courtesies  of  social  life?  Again,  there 
is  a  clause  of  the  policy  which  provides  that  when  any  acci- 
dent happens,  the  assured  shall  at  once  notify  the  company; 
and,  if  'any  claim  is  made  on  account  of  such  accident,'  like 
notice  shall  be  given;  and  'if  any  suit  is  brought  to  enforce 
such  a  claim,'  the  company,  on  notice  thereof,  "shall  defend 
such  suit,'  etc.  The  terms  'any  accident/  'any  claim,'  and 
'any  suit'  are  very  broad;  and  although,  when  construed 
solely  in  connection  with  all  the  terms  of  the  policy,  and 
without  reference  to  extrinsic  circumsances,  they  could 
properly  be  restricted  within  the  narrow  limits  for  which 
appellant  contends,  yet  such  limitations  are  not  so  clearly 
expressed  as  to  exclude  all  room  for  construction.  In  other 
words,  if  the  language  be  open  to  construction  at  all,  we  can 
conceive  of  no  sound  reason  for  not  applying  the  rule  as  to 
practical  construction  of  the  parties,  if  there  be  any  evidence 
showing  such  fact."  Fullerton  v.  United  States  Casualty 
Co.,  (1918)  184  Iowa  219,  167  N.  W.  700. 

§  16.  One  Form  May  Not  Be  Used  to  Aid  Construction  of 
Another. — The  introduction  in  evidence  of  a  form  of  insur- 
ance policy  sometimes  used  by  the  defendant  insurance  com- 
pany and  which  specifically  excludes  "damage  caused  by 
striking  any  portion  of  the  roadbed  or  by  striking  the  rails 
or  ties  of  street,  steam,  or  electric  railroads,"  throws  no  light 
on  the  proper  construction  of  a  collision  policy  which  does  not 
contain  such  an  exception,  and  therefore  is  held  to  raise  no 
presumption  that  the  one  policy  covers  'anything  specifically 

excluded   by    the   other.     Bell   v.    American    Insurance    Co., 

(1921)— Wis.— 181  N.  W.  733. 


CONSTRUCTION  OF  POLICY  13 

§  17.  Effect  of  Rider. — A  clause  of  a  rider  to  a  policy  may 
declare  that  the  agreements  and  stipulations  contained  in  the 
rider  cancel  and  replace  anything  to  the  contrary  printed  in 
the  policy,  and  in  such  case  the  clauses  of  the  rider  will 
prevail.  Cass  v.  American  Central  Ins.  Co.  (1920) — Mass. — 128 
N.  E.  716. 

§  18.  Deductible  Clause. — A  provision  to  the  effect  that 
from  the  amount  of  each  claim  when  determined  the  sum  of 
$25  shall  be  deducted  and  reciting  that  "the  company  shall 
be  liable  for  loss  or  damage  in  excess  of  that  amount  only 
"clearly  restricts  the  indemnity  payable  to  such  an  amount 
as  appears  in  excess  of  $25."  Stix  v.  Travelers'  Indemnity 
Co.  of  Hartford  (1913)  175  Mo.  App.  171,  157  S.  W.  870. 


CHAPTER  III. 

Reformation  and  Cancellation. 

§  19.    Reformation  of  Policy  for  Mutual  Mistake. 

§  20.    Same. 

§  21.    Cancellation  of  Policy — Necessity  for  Surrender. 

§21a.  Notice  of   Cancellation. 

§  22.    Waiver  of  Condition  as  to  Return  of  Premium. 

§  23.    Waiver  of  Cancellation  Provisions. 

§  19.    Reformation  of  Policy  for  Mutual  Mistake. — To  be 

entitled  to  reformation  of  a  policy  for  mistake,  the  party 
asking  it  must  show,  not  only  that  the  alleged  mistake  oc- 
curred, but  also  that  it  was  mutual.  In  other  words,  it  must 
be  made  to  appear  that,  by  mistake,  the  contract  as  written 
fails  to  express  the  mutual  intent;  of  the  parties ;  and  if  the 
mistake  is  denied,  the  fact  must  be  established  by  a  clear 
and  satisfactory  preponderance  of  the  evidence.  Vague  and 
uncertain  statements  of  the  insured  of  what  occurred  when 
the  insurance  was  taken  out  will  not  alone  establish  mutual 
mistake  in  the1  terms  of  the  policy  as  written;  but  the  cir- 
cumstances attending  the  transaction,  together  with  the 
practical  interpretation  put  upon  the  policy  by  both  parties 
may  be  taken  into  consideration.  In  an  action  seeking  re- 
formation of  an  indemnity  policy  over  a  car  described  in  the 
policy  as  being  "for  business  and  pleasure"  so  as  to  cover 
injuries  by  the  car  when  driven  by  a  servant  or  any  member 
of  the  insured's  family,  it  appeared  that  after  an  accident 
from  collision,  occurring  when  an  adult  but  dependent  son 
of  the  insured  was  driving,  the  company  took  charge  of  ne- 
gotiations for  settlement  and  did  settle  with  two  of  the,  in- 
jured persons.  It  sought  a  similar  settlement  with  the  third, 
but  failed  to  reach  an  agreement  on  terms ;  and  when  such 
person  brought  suit  against  the  insured's  son,  the  driver  of 

14 


REFORMATION  AND  CANCELLATION  15 

the  car,  it  took  up  the  defense,  which  it  subsequently  aban- 
doned on  the  ground  that  the  claim  therein  was  not  covered 
by  the  policy.  It  was  held  that,  since  the  plaintiff  believed 
and  acted  upon  the  belief  that  his  policy  covered  a  case  of 
this  kind,  and  the  company  gave  him  every  reason  to  under- 
stand that  such  was  its  own  construction  of  their  contract, 
the  insured  was  entitled  to  reformation  of  the  policy,  if 
that  was  necessary  to  enable  him  to  recover  thereon.  Fuller- 
ton  v.  United  States  Casualty  Co.,  (1918)  184  Iowa  219,  167 
N.  W.  700. 

§  20.  Same. — An  owner  wished  to  insure  against  damage 
to  his  car  by  direct  collision,  but,  by  mistake  of  himself  and 
the  insurance  company's  local  agent,  who,  under  the  evidence, 
had  no  authority  to  make  a  binding  contract  of  insurance, 
attached  the  wrong  rider,  insuring  against  liability  for  dam- 
age to  the  property  of  others  by  collision.  About  a  month 
thereafter  the  insured's  car  was  injured  by  coming  into  col- 
lision with  an  obstacle  in  the  road.  On  claiming  for  the 
loss  he  was  informed  by  the  company  that  it  was  not  covered 
by  the  policy.  The  claim  being  a  small  one,  the  company 
settled  it,  its  manager  explaining  to  the  insured  at  the  time 
that  there  was  a  different  rate  of  premium  covering  damages 
to  his  own  machine.  "This  matter  being  thus  adjusted, 
Browne  (the  owner  of  the  car)  took  no  step  either  to  re- 
scind his  policy,  or  to  request  the  company  to  issue  to  him 
a  new  one  which  would  without  question  insure  him  against 
damage  to  his  automobile  through  direct  collision ;  and  mat- 
ters remained  in  that  condition  when,  in  September  of  the 
same  year,  while  being  driven  by  himself,  his  automobile 
came  into  collision  with  another  vehicle  and  was  damaged 
to  the  extent  of  $1,350.  He  made  claim  upon  the  company 
for  this  amount,  and  was  refused  payment  upon  the  ground 
that  in  the  opinion  of  the  company  such  a  loss  was  not 
covered  by  the  policy."  Browne  sued  the  company  on  the 
policy,  and  for  its  reformation  if  that  was  necessary  to  en- 
title him  to  recovery.  The  company  contended  that  the 


16  AUTOMOBILE  INSURANCE  LAW 

policy  issued  to  Browne  was  the  one  he  applied  for;  that  it 
did  not  cover  the  loss  sought  to  be  covered,  and  that  in  any 
event,  after  the  first  accident  and  its  settlement,  Browne,  by 
retaining  his  policy  and  not  offering  to  pay  the  additional 
premium  chargeable  upon  a  policy  of  the  kind  claimed  to 
have  been  requested,  was  in  no  position  to  ask  for  reforma- 
tion of  his  policy.  Browne  contended  that  it  was  the  inten- 
tion of  the  parties  by  their  contract  to  insure  him  against 
damage  to  his  automobile,  and  that  he,  having  paid  the  pre- 
mium demanded  by  the  company,  was  entitled  to  have  the 
policy  reformed  so  as  to  cover  such  damage;  and  further, 
that  the  company  by  its  action  in  recognizing  and  paying  the 
first  claim,  and  not  at  that  time  canceling  the  policy,  was 
estopped  to  deny  that  the  policy  covered  the  loss  sought  to 
be  recovered.  It  was  held  that  the  plaintiff  was  not  en- 
titled to  reformation  of  the  policy,  and  that  the  company 
was  not  estoppel  to  deny  that  it  was  liable  for  the  amount 
claimed.  The  first  claim,  which  the  company  settled,  "was 
for  a  small  amount ;  and  nothing  was  more  natural  than  that 
the  manager  of  the  company,  recognizing  that  the  plaintiff 
had  been  misled  by  the  company's  agent  into  applying  for  a 
policy  different  from  the  one  he  desired,  should  be  willing  to 
make  plaintiff  whole  up  to  that  time  without  additional  charge  ; 
but  no  inference  could  properly  be  drawn  therefrom  that  he 
was  willing  that  such  losses  should  be  recognized  in  the 
future  now  that  Browne  no  longer  labored  under  any  mis- 
apprehension or  mistake.  The  true  reason  for  the  plaintiff's 
inaction  suggested  by  the  evidence  is  rather  that  he  was 
still  of  the  opinion  that  his  policy  covered  the  character  of 
loss  in  dispute,  and  that  if  the  question  ever  came  to  be 
litigated  the  courts  would  sustain  his  view.  The  circum- 
stances attending  the  settlement  by  the  company  of  Browne's 
first  loss  are  entirely  insufficient  to  constitute  an  estoppel  as 
against  the  defendant,  nor  was  such  estoppel  an  issue  in  the 
case."  Browne  v.  Commercial  Union  Assurance  Co.  (1916) 
30  Cal.  App.  547,  158  Pac.  765.  Where  in  an  action  on  a 


REFORMATION  AND  CANCELLATION  17 

policy  for  the  loss  of  the  insured  automobile  destroyed  in  a 
collision,  the  only  defense  was  that  the  provision  in  the 
policy  against  loss  or  damage  by  collision  had  been  left  in 
the  policy  by  mutual  mistake,  and  the  preponderance  of  the 
evidence  was  in  favor  of  the  defendant  company's  plea,  it 
was  held  that  the  question  was  one  for  the  jury.  Drew  v. 
American  Automobile  Ins.  Co.  (Tex.  Civ.  App.  1918)  207 
S.  W.  547;  see  also  §30.  Limits  of  Agent's  Authority. 

21.     Cancellation    of    Policy — Necessity    for    Surrender. — 

A  provision  in  an  automobile  insurance  policy  that  the  un- 
earned premium  shall  be  returned  on  the  cancellation  of  the 
insurance  only  on  the  surrender  of  the  policy  is  a  reasonable 
requirement ;  and  in  an  action  for  unearned  premiums  a 
nonsuit  is  held  properly  entered  where  the  insured  has  failed 
to  return  his  policy  upon  the  cancellation  of  the  insurance. 
A  policy  provided:  "This  policy  shall  be  cancelled  at  any 
time  at  the  request  of  the  insured,  or  by  the  company  by  giv- 
ing five  days'  notice  of  such  cancellation.  If  this  policy  shall 
be  cancelled  as  hereinbefore  provided  or  become  void  or 
cease,  the  premium  having  been  actually  paid,  the  unearned 
portion  shall  be  returned  on  surrender  of  this  policy  or 
last  renewal,  this  company  retaining  the  customary  short 
rate."  It  was  held  that  the  right  of  an  insured  to  demand 
the  return  of  the  premium  is  wholly  dependent  upon  the 
covenants  of  the  policy.  Where  an  insured  undertakes  to 
cancel  the  policy  under  a  covenant  such  as  that  above  quoted, 
he  has  no  right  to  demand  a  return  of  the  unearned  portion 
of  the  premium  until  he  has  surrendered  the  policy.  This  is 
a  reasonable  requirement,  for  if  the  policy  were  suffered  to 
remain  in  the  possession  of  the  insured  the  company  would, 
in  case  of  a  loss,  be  subject  to  the  risk  of  having  it  asserted 
that  the  negotiations  for  the  cancellation  of  the  policy 
never  had  been  completed  or  that  some  officer  of  the  com- 
pany had  agreed  to  a  revocation  of  the  cancellation  and  ac- 
cepted a  repayment  of  the  premium.  Healy  v.  Stuyvesant 
Insurance  Co.,  (1918),  72  Pa.  Superior  Ct.  168.  Where  there 


18 

was  a  conflict  in  the  evidence  with  reference  to  whether  or 
not  there  had  been,  subsequent  to  the  issuance  of  an  automo- 
bile policy,  a  cancellation  of  the  collision  features  agreed 
upon  by  both  the  insured  and  the  insurer,  the  question  was 
held,  in  an  action  on  the  policy  following  a  collision,  to  be 
one  for  the  jury.  Drew  v.  American  Automobile  Ins.  Co. 
(1918)  Tex.  Civ.  App.  207  S.  W.  547. 

§21  a.  Notice  of  Cancellation. — A  fire  policy  provided  that 
the  policy  might  be  canceled  on  written  notice  by  either 
party  stating  when  the  cancellation  should  be  effective,  "notice 
of  cancellation  deposited  in  the  United  States  mail,  postage 
prepaid,  to  the  address  of  the  assured."  to  be  sufficient ;  a 
check  for  the  unearned  premium,  similarly  mailed,  being  suf- 
ficient tender  thereof.  The  insurance  company  sent  a  regis- 
tered letter  to  the  insured  at  his  residence,  notifying  him  of 
cancellation  of  the  policy.  The  insured  was  out  of  town  and 
the  letter  was  returned  pursuant  to  the  printed  request  to 
return  in  five  days.  The  insured  returned  within  a  month. 
His  automobile  was  burned  within  three  months,  the  period 
for  which  the  postmaster  is  authorized  by  the  federal  statute, 
Rev.  St.  §3936  ,to  hold  ordinary  letters  if  he  believes  they  can 
be  delivered.  In  an  action  on  the  policy  it  was  held  that  the 
notice  of  cancellation  was  not  sufficient,  the  company's  re- 
quest to  return  the  letter  within  five  days  having  lessened  the 
insured's  chance  of  receiving  the  notice.  American  Automo- 
bile Insurance  Co.  v.  Watts  (1914)  12  Ala.  App.  518,  67  So.  758. 

§  22.    Waiver  of  Condition  as  to  Return  of  Premium. — In 

a  stipulation  in  a  policy,  authorizing  cancellation  of  a  policy 
by  the  insurance  company,  on  tendering  the  pro  rata  un- 
earned premium,  the  requirement  as  to  tendering  the  pre- 
mium is  inserted  for  the  benefit  of  the  insured  and  may  be 
waived  by  him.  In  a  case  where  the  company  failed  to  pay 
the  unearned  premium  on  the  surrender  of  a  policy  contain- 
ing such  a  cancellation  clause  (Buckley  v.  Citizens'  Insur- 
ance Co.,  188  N.  Y.  399,  81^  N.  E.  165)  the  court  said:  "The 
one  object  for  the  cancellation  clause  is  to  place  the  policy 


REFORMATION  AND  CANCELLATION  19 

in  the  custody  of  the  insurance  company  absolutely  and  un- 
conditionally. If  the  insured  permits  this  to  be  done  by  his 
voluntary  act  when  the  company  gives  notice  of  cancellation 
without  receiving  from  it  the  unearned  premium  he  assents  to 
cancellation,  but  can  sue  for  the  amount  due  him."  It  is  im- 
material that  there  is  no  written  notice  of  cancellation.  If 
the  insured,  having  knowledge  of  the  company's  intention  to 
cancel  the  policy,  voluntarily  surrenders  it  unconditionally 
for  that  purpose,  the  policy  is  cancelled,  though  the  unearned 
premium  is  not  tendered  back.  Hancock  v.  Hartford  Fire 
Insurance  Co.  (1913)  81  Misc.  (N.  Y.)  159,  142  N.  Y.  Supp. 
352,  affirmed  145  N.  Y.  Supp.  1126. 

§  23.  Waiver  of  Cancellation  Provisions. — It  is  held  that 
the  clause  of  the  Ohio  statute  (Section  9577  Consolidated 
Code),  requiring  the  insertion  in  every  fire  policy  of  an  obli- 
gation to  cancel  it  upon  the  written  request  of  the  insured, 
is  limited  in  its  effect  to  policies  governing  property  in  Ohio, 
and  a  provision  in  a  contract  for  insuring  automobiles,  though 
entered  into  in  Ohio,  waiving  the  provisions  in  the  policies 
for  cancellation  is  valid,  the  automobiles  not  being  located  in 
that  state.  Automobile  Insurance  Co.  of  Hartford,  Conn.,  v. 
Guaranty  Securities  Corp.  (1917)  240  Fed.  222.  The  Con- 
necticut standard  form  of  policy,  which  contains  a  cancella- 
tion clause  and  must  be  used  under  the  Connecticut  laws^ 
may  contain  upon  separate  slips  or  riders  to  be  attached  to 
the  policy  provisions  adding  to  or  modifying  those  contained 
in  the  policy  (Section  3497  Conn.  Gen.  Stat.  1902).  A  waiver 
by  agreement  of  the  parties  to  a  contract  for  the  insurance 
of  many  automobiles  of  the  provision  for  cancellation  would 
therefore  seem  to  be  good  under  the  Connecticut  law.  Auto- 
mobile Insurance  Co.  of  Hartford,  Conn.,  v.  Guaranty  Se- 
curities Corp.  (1917),  240  Fed.  222. 

A  company  engaged  in  the  business  of  financing  the  retail 
sale  of  automobiles  by  advancing  money  to  the  dealers  en- 
tered into  a  contract  with  an  insurance  company  to  insure 
the  machines  for  three  years,  the  contract  providing  that 


20  AUTOMOBILE  INSURANCE  LAW 

the  cancellation  provisions  in  the  policies  should  be  waived. 
Before  the  termination  of  the  contract  the  finance  company 
sought  to  repudiate  it  and  enter  into  a  similar  arrangement 
with  another  insurance  company.  The  first  company  sought 
an  injunction.  It  was  held  that,  as  the  methods  of  adjust- 
ment of  the  second  company  might  not  be  the  same  as  those 
of  the  first,  so  that  their  profits  might  not  be  any  certain 
basis  of  what  the  first  company  would  have  made  out  of 
the  original  contract  if  it  had  been  allowed  to  perform  it, 
the  first  company  was  entitled  to  a  preliminary  injunction  to 
restrain  the  breach  of  contract.  Automobile  Insurance  Co.  of 
Hartford,  Conn.  v.  Guaranty  Securities  Corp.  (1917)  240  Fed. 
222. 


CHAPTER  IV 

Notice  and  Proofs  of  Loss 

§  24.     Necessity   for  Notice  and   Proofs  of  Loss. 
§  25.    Time   for  Notice  and   Proofs  of   Loss. 
§  26.     Evidence  of  Receipt  of  Proofs  by  Company. 
§  27.    Waiver  of  Notice  and   Proofs  of  Loss. 
§  28.     Question  of  Waiver  for  Jury. 

§24.     Necessity   for   Notice  and   Proofs   of   Loss. — In    the 

absence  of  evidence  of  a  waiver  by  the  defendant  insurance 
company  of  the  requirement  of  the  policy  as  to  notice  and 
proofs  of  loss,  lack  of  compliance  with  such  requirement  will 
preclude  recovery  on  the  policy.  Gallagher  v.  American  Alli- 
ance Insurance  Co.  of  New  York  (1921) — 111.  App. — 

But  to  have  this  effect,  some  of  the  later  cases  hold  that 
either  the  service  must  be  made  a  condition  precedent  to  the 
liability  of  the  company,  or  forfeiture  for  failure  must  be 
provided  for  by  the  policy.  Zackwik  v.  Hanover  Fire  Ins.  Co., 
(1920),— Mo.  App.— 225  S.  W.  135.  See  also  Clark  v.  London 
Assur.  Corp.,  (1921),— Nev.— 195  Pac.  809. 

§25.  Time  for  Notice  and  Proofs  of  Loss. — A  theft 
policy  contained  two  conditions  precedent  to  the  liability  of 
the  company.  One  was  that  "in  the  event  of  loss  or  damage 
the  assured  shall  forthwith  give  notice  thereof  in  writing  to 
this  company  or  the  authorized  agent  who  issud  this  policy ;" 
second,  that  he  "within  sixty  days  thereafter,  unless  such  time 
is  extended  in  writing  by  this  company,  shall  render  a  state- 
ment to  this  company,  signed  and  sworn  to  by  said  assured, 
stating  the  knowledge  and  belief  of  the  assured  as  to  the 
time  and  cause  of  the  loss  or  damage,  the  interest  of  the 
assured,  and  of  all  others  in  the  property."  The  policy  also 
contained  this  provision :  "It  is  a  condition  of  this  policy  that 
failure  on  the  part  of  the  assured  to  render  such  sworn 
statement  of  loss  to  the  company  within  sixty  days  of  the 

21 


22  AUTOMOBILE  INSURANCE  LAW 

date  of  loss  (unless  such  time  is  extended  in  writing  by;  the 
company)  shall  render  such  claim  null  and  void." 

In  an  action  on  the  policy  the  insured  contended  that  the 
automobile  was  stolen  on  October  17,  1919,  in  Chicago,  from 
in  front  of  a  saloon  where  he  had  left  it  during  his  absence 
in  the  saloon  for  ten  minutes,  with,  a  friend;  that  when  he 
came  out  it  had  disappeared. 

Neither  by  the  statement  nor  the  evidence  did  it  appear 
that  the  plaintiff  forthwith  gave  notice  of  his  loss  or  made 
proof  of  claim  within  the  terms  and  conditions  of  the  pro- 
vision of  the  policy  making  it  necessary  for  him,  so  to  do  as 
a  condition  precedent  to  his  right  of  recovery.  When  the 
plaintiff  applied  to  the  defendant  for  reimbursement  for  loss 
under  the  policy,  the  defendant  denied  liability  because  of 
the  plaintiff's  failure  to  give  notice  of  the  theft  forthwith, 
after  the  loss,  and  because  no  proof  of  claim  had  ever  been 
made  and  sent  to  the  defendant  company.  It  was  held  that 
under  the  circumstances  the  plaintiff  was  not  entitled  to  re- 
cover. The  giving  of  notice  forthwith  of  the  loss  and  mak- 
ing proof  of  the  claim  were  held  conditions  precedent  to  the 
right  to  recover  under  the  policy.  There  is  a  practical  rea- 
son for  such  a  provision;  for  it  is  common  knowledge  that 
quick  action  after  the  theft  of  an  automobile  may  lead  to 
its  recovery,  and  that  delays,  tend  to  at  least  materially  im- 
pair the  chance  of  recovery  of  the  stolen  automobile,  delays 
giving  the  thief  an  opportunity/  to  so  disguise  the  car  as  to 
make  identification  difficult  to  say  the  least.  Gallagher  v. 
Alliance  Insurance  Co.  of  New  York  (1921) — 111.  App. — citing 
Forbes  Cartage  Co.  v.  Frankfort  Marine,  etc.  Ins.  Co.,  195 
111.  App.  75. 

§26.     Evidence   of   Receipt    of  Proofs  by  Company. — It  is 

incumbent  on  the  plaintiff  in  an  action  on  the  policy  to  prove 
the  furnishing  to  defendant  of  a  sworn  proof  of  loss,  as  pro- 
vided by  the  terms  of  the  policy.  The  law  does  not  raise 
a  presumption  of  the  receipt  of  such  proof  because  of  the 
failure  of  the  insurance  company,  when  sued  upon  the  policy, 


NOTICE  AND  PROOFS  OF  LOSS  23 

to  prove  that  a  sworn  statement  of  the  loss  was  furnished 
the  company  or  that  the  company  expressly  waived  such 
proof.  Gallagher  v.  American  Alliance  Insurance  Co.  of  New 
York  (1921) — 111.  App. — .  Evidence  of  the  contents  of  proofs  of 
loss  will  not  be  admitted  until  evidence  of  the  receipt  of  the 
proofs  by  the  company  has  been  introduced.  Glaser  v.  Wil- 
liamsburg  City  Fire  Ins.  Co.  (1921)— Ind.  App.— 125  N.  E.  787. 

§27.    Waiver  of  Notice  and  Proofs  of  Loss. — The  defense  of 
noncompliance  with   the  policy  requirements  of  notice  and 
proofs  of  loss  may  be  waived  by  the  subsequent  acts  of  the 
insurance  company's  duly  authorized  representative.    Stone  v. 
American  Mutual  Auto  Insurance  Co.  (1921) — Mich. — 181  N. 
W.  973.    Although  a  policy  requires  sworn  proof  of  loss  it  is 
held  that  the  insured  has  a  right  to  rely  upon  the  assurance 
of  the  company's  agent  that  the  insured's  written  notice  of  the 
loss  was  sufficient,  and  that  no  further  notice  or  proof  need  be 
given.     O'Connor  v.  Maryland  Motor  Insurance  Co.,  (1919) 
287  111.  204,  122  N.  E.  489.    Where  no  proof  of  loss  had  been 
filed  with  the  company  in  accordance  with  the  terms  of  the 
policy  the  trial  court  permitted  the  introduction  of  a  state- 
ment written  by  the  adjuster  of  the  company  summoned  by 
the  agent  of  the  company  to  whom  the  fire  loss  had  been 
reported,  which  the  adjuster  stated  had  been  written  by  him 
in  the  presence  of  the  plaintiff  insured  from  the  story  told 
him  by  the  plaintiff  relative  to  the  fire,  and  was  immediately 
signed  by  the  plaintiff.     Dunn  v.  First  National  Fire  Insur- 
ance Co.  (1918)  14  Schuylkill  (Pa.)  Legal  Record  389.     But 
the   representative  must  be  one  duly  authorized  to  do  the 
acts  claimed  as  waiver.    An  automobile  insured  against  loss 
or  damage  by  fire  was  damaged  by  fire  and  the  local  agent 
of  the  insurance  company  inspected  it  next  day,  after  which 
he   furnished  the   insured  blanks   for  proof   of  loss.    There 
was  no  evidence  that  the  local  agent  had  any  authority  to 
make  adjustment  of  the  loss,  or  that  any  other  agent  or 
officer  of  the  insurance  company  did  anything  looking  to  an 
adjustment  of  the  loss,  or  that  could  be  construed  as  a  waiver 


24  AUTOMOBILE  INSURANCE  LAW 

of  proof  of  loss.  It  was  held  there  was  no  waiver  of  proofs 
of  loss  required  by  law  and  by  the  terms  of  the  policy. 
Glaser  v.  Williamsburg  City  Fire  Ins.  Co.  (1921) — Ind.  App. — 
125  N.  E.  787.  If  a  defendant  insurance  company  disclaims 
absolutely  that  it  issued  any  theft  policy  of  an  earlier  date 
than  that  on  which  the  automobile  was  stolen,  the  plaintiff 
is  relieved  from  the  necessity  of  presenting  proofs  of  loss. 
Fodor  v.  National  Liberty  Ins.  Co.  of  America,  (1919)  175 
N.  Y.  Supp.  112.  Where  the  insured  under  a  theft  policy, 
nine  days  after  the  disappearance  of  a  conditional  vendee 
with  the  insured  automobile,  notified  the  insurance  company 
of  the  loss  or  disappearance  of  the  automobile,  and  within 
60  days  from  the  date  of  the  loss  the  company  denied  liability 
on  the  ground  that  the  policy  did  not  cover  embezzlement 
or  wrongful  conversion,  the  company  was  held  to  have 
waived  proofs  of  loss.  Buxton  v.  International  Indemnity 
Co.  (1920)— Cal.— 191  Pac.  84. 

By  entering  into  an  arbitration  under  an  automobile  fire 
policy  stipulation  therefor  within  the  time  allowed  for  proof 
of  loss,  the  insurance  company  was  held  to  waive  all  question 
as  to  the  fact  and  sufficiency  of  the  proof  of  loss.  Union 
Marine  Insurance  Co.  v.  Charlie's  Transfer  Co.  (1914)  186 
Ala.  443>  65  So.  78. 

Settlement  by  the  insurance  company  with  the  mortgagee 
of  an  insured  automobile  insured  under  the  policy  for  his 
interest  is  not  a  waiver  of  proofs  of  loss  'on  the  part  of  the 
insured  owner.  Glaser  v.  Williamsburg  City  Fire  Ins.  Co. 
(1920)  Ind.  App.  125  N.  E.  787. 

§28.  Question  of  Waiver  for  Jury. — In  an  action  on  a 
theft  policy  where  the  plaintiff  alleged  that  the  insurance 
company  had  waived  the  condition  of  the  policy  as  to  notice 
in  writing  and  sworn  statement  of  loss  and  accepted  verbal 
notice  of  the  total  loss  as  sufficient,  it  was  held  that  the 
question  of  waiver  was  properly  submitted  to  the  jury. 
More  v.  Continental  Insurance  Co.,  (1915)  169  App.  Div. 
914,  154  N.  Y.  Supp.  1134,  affirmed  222  N.  Y.  607. 


CHAPTER  V. 

Agents,  Brokers  and  Adjusters 

§29.  Authority  of  Local  Agent. 

§30.  Limits  of  Agent's  Authority. 

§31.  Agent  for  Disclosed  Principal. 

§32.  Agent  for  Undisclosed  Principal. 

§  33.  Broker's  Authority  to  Act  for  Company. 

§  34.  Adjuster  Cannot  Delegate  Powers. 

§  35.  Broker  or  Agent  as  Insured's  Agent. 

§  36.  Adjuster's   Authority   to   Admit    Liability. 

§29.  Authority  of  Local  Agent. — In  an  action  to  reform 
an  automobile  insurance  policy  the  question  arose  as  to  the 
authority  of  a  local  agent  to  bind  the  company  by  attaching 
the  wrong  rider  to  the  policy.  The  agent's  letter  of  appoint- 
ment was  in  the  following  terms: 

"Automobile  Insurance. 

"On  the  nomination  of  special  agent,  Mr.  F.  J.  H. 
Manning,  you  are  hereby  appointed  agent  of  the  Com- 
mercial Union  Assurance  Co.  Ltd.,  for  the  transaction 
of  automobile  insurance  in  Salinas,  subject  to  such  in- 
structions as  may  be  given  you  from  time  to  time  by 
this  office. 

"The  rate  of  your  commission  will  be  15  per  cent. 
"Policies  will  be  written  at  this  office,  and  will  be  sent 
to  you  promptly  upon  receipt  of  application. 
"Yours  truly, 

"E.  I.  Niebling,  Manager." 

The  agent  was  supplied  by  the  company  with  blank  forms 
of  application  and  riders.  Acting  under  his  letter  of  ap- 
pointment he  received  applications,  forwarded  them  to  the 
company  at  its  office  in  San  Francisco,  which,  if  the  risk 
applied  for  was  accepted,  issued  a  policy,  and  sent  it  to  the 
agent,  who  delivered  it  to  the  insured,  collecting  the  premium 
therefor. 

25 


26  AUTOMOBILE  INSURANCE  LAW 

It  was  held  that  the  agent,  under  these  facts,  had  no  au- 
thority to  make  a  binding  contract  of  insurance;  that  the 
general  language  of  the  letter  appointing  him  as  agent  "for 
the  transaction  of  automobile  insurance  "was  to  be  construed 
in    connection    with    the    further    language    of    the    letter: 
"Policies  will  be  written  at  this  office,"  and  with  the  conduct 
of  the  parties  under  it.     There  was  no  question  in  the  case 
of  ostensible  agency ;  and  the  evidence  as  to  what  took  place 
between  the  agent  and  the  plaintiff  at  the  time  of  the  appli- 
cation for  the  policy  clearly  showed  that  the  agent  was  doing 
nothing  more  than  preparing  the  plaintiff's  application   for 
the  purpose  of  forwarding  it  to  the  insurance  company.     The 
court  said:  "The  word  'written'  in  the  phrase,  'Policies  will 
be  written  at  this  office,'  evidently  means  something  more 
than  the  mere  physical  act  of  filling  in  the  blanks  of  an  in- 
surance policy.     Insurance  'written'  is  insurance  contracted 
for.     Consequently    the    consummation    of    the    contract    in 
controversy  was  held  to  be  dependent  upon  its  ultimately 
being  written  at  the  general  office  in  San  Francisco.     There 
was,  therefore,  no  completed  contract  of  insurance  until  the 
policy  applied  for  was  written  and  delivered ;  and  it  is  settled 
that  the  authority  to  complete  contracts  primarily  differen- 
tiates a  general  agent  having  power  to  bind  his  principal 
from  mere  soliciting  agents  and  other  intermediaries  operat- 
ing between  the  insured  and  the  insurer,  who  have  authority 
only    to    initiate    contracts,    and    consequently    cannot    bind 
their  principals  by  anything  they  may  say  or  do  during  the 
preliminary    negotiations."     Browne    v.    Commercial    Union 
Assurance  Co.  of  London  (1916)  30  Cal.  App.  547. 

§  30.  Limits  of  Agent's  Authority. — An  automobile  hiring 
company  obtained  from  the  Wilkerson  Insurance  Agency,  of 
Vicksburg,  a  fire  policy  on  a  certain  car.  The  risk  was 
originally  written  by  the  Firemen's  Fund  Insurance  Co.,  but 
that  company,  for  some  reason,  ordered  its  agency  to  cancel 
the  policy.  The  Wilkerson  Agency  did  not  represent  any 
company  which  would  rewrite  the  risk;  so,  in  accordance 


AGENTS,  BROKERS  AND  ADJUSTERS  27 

with  a  custom  or  understanding  between  the  insurance 
agents  of  Vicksburg,  it  solicited  the  Flowers  Agency,  the 
regular  agents  of  the  Hartford  Fire  Ins.  Co.,  to  issue  a  policy. 
This  was  done,  and  the  policy  delivered  to  the  Wilkerson 
Agency  and  by  them  to  the  insured.  The  policy  had  Wilker- 
son's  sticker  on  it.  The  Wilkerson  Agency  paid  the  pre- 
mium, and  by  a  custom  of  dealing  the  two  agencies  divided 
the  commission.  Neither  the  agencies  nor  the  insured  read 
the  policy,  which,  after  the  destruction  of  the  car  by  fire 
six  months  later,  was  discovered  to  cover  the  car  only  while 
it  was  in  the  garage,  and  did  not  cover  the  loss.  The  insured, 
m  an  action  for  reformation  of  the  policy,  claimed  that  the 
contract  made  by  them  was  for  a  policy  exactly  like  the  one 
canceled,  which  would  have  covered  the  loss. 

There  was  evidence  that  the  insured  knew  when  they  re- 
ceived the  policy  that  the  Flowers  Agency  was  the  Hart- 
ford's agents  and  that  the  Wilkerson  Agency  was  not;  that 
they  knew  the  policy  delivered  was  the  only  policy  the  Hart- 
ford would  write  on  the  car,  and  that  its  agent  had  no  au- 
thority to  write  a  policy  like  that  canceled.  In  other  words, 
the  evidence  showed  that  the  limitation  placed  by  the  Hart- 
ford upon  its  agents  was  known  to  the  plaintiff  when  it  ac- 
cepted the  Hartford  policy.  There  being  no  warrant  for 
holding  that  a  principal  can  be  bound  by  the  unauthorized 
acts  of  his  agent,  and  known  to  the  party  dealing  with  the 
agent  to  be  m  direct  violation  of  the  instructions  of  the 
principal,  the  insured  was  held  not  entitled  to  reformation 
of  the  policy.  Mississippi  Electric  Co.  v.  Hartford  Fire  Ins. 
Co.  (1913)  105  Miss.  767,  63  So.  231. 

§  31.  Agent  for  Disclosed  Principal.— The  general  principle 
of  law  applies  that  where  an  agent  acts  within  the  scope  of 
his  authority  for  a  disclosed  principal  he  does  not  bind  him- 
self unless  it  appears  that  he  expressly  agreed  to  become 
personally  responsible.  Cass  v.  Lord  (1920)— Mass.— 128  N.  E. 
716.  In  an  action  against  insurance  agents  individually  it 
was  alleged  in  substance  that  the  defendants  verbally  agreed 


28  AUTOMOBILE  INSURANCE  LAW 

to  procure  and  deliver  a  valid  policy  of  insurance  against  fire 
upon  automobiles  from  time  to  time  owned  by  the  plaintiff 
in  his  business,  or  to  insure  such  automobiles  as  the  plaintiff 
might  from  time  to  time  own  and  have  in  hand  in  connection 
with  his  business  as  an  "automobile  dealer,"  or  to  procure  and 
deliver  to  the  plaintiff  a  valid  policy  of  insurance  upon  auto- 
mobiles from  time  to  time  owned  by  the  plaintiff  in  his  busi- 
ness and  in  the  meantime  "to  insure  such  automobiles  them- 
selves." The  defendants  procured  from  an  insurance  company 
and  delivered  a  policy  .binding  the  parties  according  to  its 
terms.  Having  done  so,  the  plaintiff  was  forced  to  take  the 
position  that,  independently  of  their  principal,  they  also 
agreed  to  become  personally  liable  as  indemnitors,  and  acting 
solely  for  themselves  to  insure  his  property. 

The  plaintiff's  own  uncontradicted  statements  and  admis- 
sions of  his  contractual  relations  with  the  defendants  were : 
"I  knew  that  they  were  general  agents  and  dealt  with  them 
as  such.  I  did  not  expect  they  were  going  to  insure  my 
car  themselves.  *  *  *  I  relied  on  such  contract  they  were  to 
get  for  me  from  the  insurance  company."  It  also  appeared 
that  all  premiums  were  paid  to  the  defendants  as  general 
agents  of  the  company.  This  evidence  was  held  insufficient 
to  warrant  a  finding  that  the  defendants  had  bound  them- 
selves individually,  and  the  plaintiff  could  not  recover  from 
them  for  a  breach  of  the  contract.  Cass  v.  Lord  (1920) 
—Mass.— 128  N.  E.  717. 

§  32.  Agent  for  Undisclosed  Principal. — In  an  action  to 
recover  under  an  automobile  insurance  policy  signed  "New 
Jersey  Indemnity  Company,  Attorney  in  Fact,"  and  by  the 
terms  of  which  policy  "subscribers  to  Motor  Car  Under- 
writers at  New  Jersey  Indemnity  Exchange  severally  agree 
to  indemnify  the  subscriber  named  herein,"  the  amount  of 
loss  to  be  ascertained  by  the  subscriber  and  the  attorney  in 
fact,  while  the  policy  was  regarded  by  the  court  as  an 
anomalous  one,  it  was  held  to  be  a  contract  by  an  agent  for 


AGENTS,  BROKERS  AND  ADJUSTERS  29 

unnamed  principals,  and  the  attorney  in  fact  was  liable  on 
the  policy.  Solomon  v.  New  Jersey  Indemnity  Co.  (1920) 
— N.  J.  L.— 110  Atl.  813. 

§  33.     Broker's  Authority  to  Act  for  Insurance  Company. 

— Where  brokers,  who  wrote  a  firm  that  their  letter  would 
protect  the  firm  from  fire  or  theft  over  specified  cars,  the  cov- 
erings being  in  a  named  insurance  company,  had  never  acted 
as  agents  of  the  insurance  company  up|  to  that  time  or  had 
any  business  with  the  company,  or  had  represented  to  the 
firm  that  they  had  any  authority  to  act  for  the  company, 
the  case  was  not  one  of  undisclosed  principal,  and  the  com- 
pany was  not  bound  by  their  letter.  Cranston  v.  California 
Insurance  Co.  (1919)  94  Or.  369,  185  Pac.  292.  The  fact  that 
an  insurance  broker  solicited  from  the  owner  of  an  auto- 
mobile an  application  for  a  fire  and  theft  policy  and  obtained 
from  an  insurance  company's  agent  the  policy  which  was 
issued  did  not  constitute  him  the  agent  of  the  insurance  com- 
pany, with  authority  to  renew  the  policy  by  oral  contract. 
Sheridan  v.  Massachusetts  Fire  &  Marine  Ins.  Co.  (1918) 
233  Mass.,  479,  124  N.  E.  249. 

The  sending  by  the  insurance  company's  agent  of  a  notice 
of  the  expiration  of  a  fire  and  theft  policy  to  the  broker  who 
had  procured  the  original  policy  was  not  evidence  from  which 
it  could  be  found  that  the  insurance  company  had  clothed 
the  broker  with  authority  to  bind  the  company  by  an  oral 
contract  of  insurance  or  by  an  agreement  to  insure.  And 
statements  by  a  broker  to  an  owner,  after  the  expiration  of 
his  fire  and  theft  policy,  that  the  owner  would  be  held  covered 
were  inadmissible  to  show  the  broker's  agency  for  the  in- 
surance company  which  had  issued  the  original  policy,  and 
could  not  be  binding  upon  that  company.  Sheridan  v.  Massa- 
chusetts Fire  &  Marine  Ins.  Co.,  (1918)  233  Mass.  479,  124 
N.  E.  249. 

§  34.  Adjuster  Cannot  Delegate  Powers. — An  insurance 
adjuster,  to  whom  the  settlement  of  the  amount  of  loss  under 
an  automobile  theft  policy  has  been  referred  by  the  insur- 


30  AUTOMOBILE  INSURANCE  LAW 

ance  company,  cannot,  without  express  authority  from  the 
company,  delegate  to  an  impartial  and  competent  third  party 
all  his  powers  as  an  adjuster  and  make  the  company  liable 
for  damages  not  covered  by  the  policy.  Consequently  it  is 
held  that  an  adjuster  for  an  insurance  company  of  the  loss 
sustained  under  a  policy  insuring  against  loss  or  damage 
by  theft,  robbery  or  pilferage  in  excess  of  $25  has  no  author- 
ity to  bind  the  company  by  an  agreement  with  the  insured 
that  the  company  will  pay  for  putting  the  car,  which  had 
been  in  use  for  two  years,  and  had  been  damaged  before 
the  theft  and  which  was  recovered  after  the  theft,  into  per- 
fect repair.  The  court  said: 

"One  Church,  a  member  of  a  firm  of  insurance  adjusters, 
after  looking  over  the  car  did  not  agree  with  the  estimate 
of  damages  furnished  by  the  plaintiff's  expert.  He  suggested 
that  the  plaintiff  take  or  send  his  car  to  the  Ford  service 
station  in  Cambridge,  and  leave  it  to  the  persons  there  in 
charge  to  determine  what  damage  was  done  and  to  make 
the  repairs.  On  the  testimony  of  Church  the  agreement  be- 
tween them  was  that  the  insurance  company  should  pay  for 
putting  the  car  in  as  good  condition  as  it  was  in  before  it 
was  stolen.  Although  the  plaintiff,  during  his  cross-examina- 
tion, corroborated  this,  yet  there  was  some  evidence  for  the 
jury  that  the  adjuster  agreed  that  the  company  would  pay 
for  putting  the  machine  'into  perfect  repair.'  The  assistant 
superintendent  of  the  Ford  service  station  testified  that  the 
plaintiff  ordered  new  parts,  and  'wanted  the  car  put  in  as 
good  condition  as  new;'  and,  in  substance,  that  the  repairs 
actually  made  were  due  to  the  wear  and  tear  and  old  age 
of  the  car,  not  to  the  damage  sustained  on  account  of  the 
theft.  Chisholm  v.  Royal  Insurance  Co.,  Ltd.,  (1917)  22,5 
Mass.  428,  114  N.  E.  715.  The  court  said:  "Under  its  con- 
tract the  defendant  insured  the  plaintiff  against  the  loss  or 
damage  due  to  the  theft  of  his  automobile.  In  the  absence 
of  evidence  as  to  the  actual  authority  of  the  adjuster,  it  is 
to  be  assumed  that  he  had  power  to  bind  the  company  in 
the  ascertainment  of  what  that  damage  was,  and  in  adjust- 


AGENTS,  BROKERS  AND  ADJUSTERS  31 

ing  the  cost  of  repairing  it.  See  Searle  v.  Dwelling  House 
Ins.  Co.  152  Mass  263.  The  condition  of  the  automobile, 
so  far  as  not  apparent,  could  be  ascertained  by  proper  ex- 
amination. It  would  be  obvious  that  in  some  particulars 
this  condition  could  not  be  due  to  the  recent  theft;  while 
some  other  items  of  the  damage  naturally  would  be  attribut- 
ed to  the  conduct  of  the  thieves  during  the  three  or  four 
hours  they  had  the  car.  The  only  question  open  to  dispute 
would  relate  to  a  few  items  which  might  or  might  not  be 
attributed  to  the  conduct  of  the  thieves.  Even  assuming 
(the  defendant  having  waived  the  provision  relating  to  ap- 
praisal) that  the  adjuster  had  authority  to  refer  this  de- 
batable question  to  the  Ford  company  as  an  impartial  and 
competent  third  party,  he  could  not,  on  the  facts  disclosed, 
bind  the  defendant  by  an  alleged  agreement  which  purported 
not  only  to  delegate  to  the  third  party  all  his  powers  as  an 
adjuster,  but  to  make  the  insurance  company  liable  for 
damages  that  plainly  were  not  covered  by  the  policy.  Church 
had  authority  only  to  ascertain  and  adjust  the  loss  sustained 
by  the  theft  of  the  automobile  ;  and  there  is  nothing  in  the 
record  to  show  that  the  company  ratified  his  alleged  agree- 
ment to  give  the  plaintiff  a  practically  new  car,  or  that  it 
waived  the  provision  of  the  policy  limiting  its  liability  to 
the  actual  cost  of  repairing,  or,  if  necessary,  replacing  the 
parts  damaged  or  destroyed  by  the  theft." 

§  35.  Broker  or  Agent  as  Insured's  Agent. — The  well 
settled  rule  applies,  in  cases  relating  to  automobile  insurance 
policies,  that  where  an  insurance  broker  requests  insurance 
from  a  company  which  he  does  not  represent  he  is  acting  for 
the  insured,  who  is  responsible  for  misrepresentations  in  the 
application  made  out  by  the  broker.  Solomon  v.  Federal  In- 
surance Co.,  (1917)  176  Cal.  133,  167  Pac.  859. 

In  an  action  against  an  insurance  company  the  plaintiffs 
alleged  the  execution  and  delivery  to  them  by  a  firm  of  in- 
surance brokers  of  a  certificate  of  insurance  in  the  following 
terms :  "Pending  receipt  of  our  covering  notes  this  will  serve 


32  AUTOMOBILE  INSURANCE  LAW 

to  protect  you  against  loss  or  damage  resulting  from  fire 
or  theft  on  the  following  cars  in  the  amount  indicated  from 
noon  of  this  date,  said  coverings  being  in  the  California  Fire 
Insurance  Company,  viz : 

"Studebaker  Six   17  Series  No.  645,718,  $970.   100,  rate 

1.25.  *  *  *  (Signed)  Hughes  &  Co." 

but  that  no  recovering  notes  were  ever  issued. 

It  was  held  that  on  its  face  the  instrument  pleaded  did  not 
amount  to  anything  except  the  personal  promise  of  Hughes 
&  Company.  It  indicated  nothing  more  than  that  Hughes 
&  Company  promised  as  an  insurance  broker  to  procure  from 
the  defendant  certain  insurance  in  favor  of  the  plaintiffs ; 
containing  no  language  which  was  binding  upon  the  defend- 
ant it  could  not  be  given  a  legal  effect  to  charge  the  com- 
pany. Cranston  v.  California  Insurance  Co.  (1919)  94  Or. 
369,  185  Pac.  292. 

Under  the  Washington  insurance  code,  1915,  §6059-2  et 
seq.,  a  person,  not  an  appointed  agent  of  an  insurance  com- 
pany, who  acts  in  any  manner  in  negotiating  contracts  of  in- 
surance for  a  party  other  than  himself,  is  a  broker,  and  acts 
as  agent  of  the  owner,  so  that  his  knowledge  would  not  be 
imputed  to  the  company.  In  an  action  on  an  automobile 
fire  policy,  where  the  defense  was  misrepresentations  as  to 
age,  condition  and  cost,  it  appeared  that  the  insured  procured 
the  insurance  through  one  Eraser,  who  had  no  appointment 
or  authority  to  solicit  applications  and  effect  insurance  for 
the  defendant  company ;  therefore  he  was  not  its  agent.  He 
aided  in  negotiating  the  contract  of  insurance  with  the  com- 
pany; therefore  he  was  a  broker  under  the  Washington 
statute.  The  fact  that  he  acted  as  a  broker  without  having 
complied  with  the  requirements  of  the  act  by  taking  out  a 
license  did  not  render  the  insurance  which  he  had  obtained 
void  or  voidable,  but  merely  rendered  him  personally  liable 
for  the  penalty  provided  in  the  act  for  having  assumed  the 
functions  of  a  broker  without  obtaining  the  proper  license. 
There  was  nothing  in  the  testimony  to  show  that  either  the 


AGENTS,  BROKERS  AND  ADJUSTERS  33 

company  or  the  owner  was  acquainted  with  the  fact  that 
Eraser  was  not  possessed  of  a  proper  license,  and,  he  having 
been  selected  by  the  owner,  there  was  no  reason  why  the 
company  should  be  charged  with  the  responsibility  for  'his 
conduct.  Even  conceding  Eraser  was  not  a  broker,  it  was 
held  that  the  owner  should  be  bound  by  his  acts  on  the 
theory  that  he  was  her  agent,  and  that  the  trial  court  should 
have  determined,  as  a  matter  of  law,  that  Eraser  was  either 
the  agent  or  broker  representing  the  owner,  and  any 
knowledge  he  had  or  representations  he  made  were  the 
knowledge  and  representations  of  the  owner.  Day  v.  St. 
Paul  Fire  &  Marine  Ins.  Co.  1920)— Wash.— 189  Pac.  95. 

§  36.  Adjuster's  Authority  to  Admit  Liability. — When  the 
insurance  company  was  notified  of  a  loss  under  an  automo- 
bile fire  policy,  its  adjuster  wrote  the  insured  that  the  com- 
pany could  replace  the  property  destroyed  for  a  stated  sum, 
adding,  "As  this  represents  the  value  of  the  car  destroyed 
and  which  value  is  the  maximum  of  the  company's  liability, 
we  inclose  proof  of  loss  for  $750  for  execution  and  return." 
It  was  held  that  this  was  an  admission  of  liability  for  the 
amount  stated,  but  where  the  insured  did  not  accept  that 
estimate  or  statement  of  the  loss,  the  company's  admission 
of  liability  was  not  a  waiver  of  its  right  to  an  appraisement 
under  the  policy.  Hart  v.  Springfield  Fire  &  Marine  Insur- 
ance Co.  (1914)  136  La.  114,  66  So.  558. 

Under  a  policy  containing  the  provision:  "This  company 
shall  not  be  held  to  have  waived  any  provision  or  condition 
of  this  policy,  nor  of  this  endorsement,  or  any  forfeiture 
thereof,  by  any  requirement,  act  or  proceeding  on  its  part 
relating  to  the  appraisal  or  to  any  examination  herein  pro- 
vided for,"  a  recent  Canadian  case  holds  that  no  act  of  an 
adjuster  can  be  binding  on  the  company  to  constitute  a 
waiver  of  a  defense  that  the  loss  is  not  covered  by  the  policy. 
The  court  said  that,  irrespective  of  any  provision  in  the 
policy  on  the  subject,  the  power  to  bind  the  insurance  com- 
pany by  a  waiver  of  the  defense  that  the  loss  is  not  covered 


34  AUTOMOBILE  INSURANCE  LAW 

by  the  policy  is  not  a  necessary  incident  to  the  duties  of  an 
adjuster,  and  it  would  require  some  express  authority  from 
the  insurance  company  to  enable  him  to  waive  its  rights  or 
to  estop  it  from  setting  up  this  defense.  The  insured,  in 
this  case,  contended  that,  whether  liable  on  the  policy  or  not, 
the  insurance  company  was  estopped  by  the  consent  and  ad- 
missions of  its  adjuster  who  was  sent  to  investigate  and  ad- 
just the  plaintiff's  claim  for  damage  to  an  automobile  which 
had  slipped  from  a  ferryboat  into  the  water  while  being 
landed.  It  was  alleged  that  the  adjuster  gave  certain  direc- 
tions to  the  repairers  as  to  what  was  to  be  done  with  the 
car,  and  otherwise  acted  towards  the  plaintiff  in  a  way  con- 
sistent only  with  the  assumption  that  the  insurers  were 
liable.  The  adjuster  denied  these  assertions ;  but,  apart  from 
his  denial,  it  was  held  fairly  clear  that,  when  he  was  des- 
patched by  the  insurers  to  investigate  the  loss,  they  could 
not  have  been  aware  of  the  exact  nature  of  the  accident. 
In  fact  it  would  be  one  of  his  duties  to  investigate  this, 
as  well  as  to  ascertain  the  amount  of  the  damage  and  to 
report.  It  was  held  his  action  constituted  no  waiver  or 
estoppel  of  the  defendants.  Wampler  v.  British  Empire 
Underwriters  Agency  (1920)  54  Dominion  Law  Rep.  657, 
citing  Atlas  Assurance  Co.  v.  Brownell  (1899)  29  Can. 
S.  C.  R.  537,  and  Commercial  Union  Assurance  Co.  v.  Marge- 
son  (1899)  29  Can.  S.  C.  R.  601. 


CHAPTER  VI. 

Arbitration,  Appraisal  and  Award 

§  37.    Waiver  of  Appraisal  by  Denial  of  Liability. 

§  38.    Effect  of  Award. 

§  39.    Appraisement  Not  Barred  by  Total  Loss. 

§  40.    Effect  of  Bad  Faith  of  Appraisers. 

§41.    Failure  of  One  Appraiser  to  Sign  Award. 

§  42.    Effect  of  Refusal  to  Arbitrate. 

§  42a.  Proceedings   in  Appraisement. 

§  42b.  Sufficiency  of  Award. 

§  37.  Waiver  of  Appraisal  by  Denial  of  Liability. — Pro- 
visions in  a  policy  that  no  right  of  action  shall  exist  until 
after  an  appraisal,  and  requiring  60  days  to  elapse  after 
notice  of  loss  before  suit  is  brought,  are  waived  by  the  in- 
surance company's  statement  to  the  insured,  when  consulted 
in  an  endeavor  to  adjust  the  loss,  that  it  will  not  do  any- 
thing. Gaffey  v.  St.  Paul  Fire  &  Marine  Insurance  Co. 
(1917)  221  N.  Y.  113,  116  N.  E.  778,  reversing  164  App.  Div. 
381 ;  Gross  v.  Germania  Fire  Insurance  Co.  (1920)  29  Pa. 
Dist.  Ct.  879. 

§  38.  Effect  of  Award. — An  award  made  in  an  arbitration 
of  the  loss  covered  by  an  automobile  fire  policy  merges  the 
right  of  action  on  the  policy  and  the  insured  is  entitled  to 
recover  only  on  the  award.  Union  Marine  Insurance  Co.  v. 
Charlie's  Transfer  Co.  (1914)  186  Ala.  443,  65  So.  78. 

§39.     Appraisement   Not  Barred   by   Total   Loss.— Where 

there  is  no  state  statute  requiring  the  insurer  to  pay  the  full 
amount  of  the  policy  on  a  car  that  has  been  totally  destroyed, 
a  total  destruction  of  the  car  does  not  render  impossible 
or  do  away  with  a  provision  in  the  policy  for  an  appraise- 
ment, stating  separately  the  sound  value  and  the  damage, 

35 


36  AUTOMOBILE  INSURANCE  LAW 

and  limiting  the  insurer's  liability  to  the  cash  value  of  the 
machine  at  the  time  any  loss  or  damage  occurs.  Hart  v. 
Springfield  Fire  &  Marine  Insurance  Co.  (1914)  136  La.,  66 
So.  558. 

§40.  Effect  of  Bad  Faith  of  Arbitrators.— Where  abitra- 
tors  are  selected  pursuant  to  the  terms  of  a  policy  and  make 
an  award,  the  award  may  be  disregarded  if  the  arbitrators 
are  guilty  of  bad  faith,  partiality,  or  misconduct  affecting 
the  result  of  the  award.  Jones  v.  Orient  Insurance  Co. 
(1914)  184  Mo.  App.  402,  1917  S.  W.  28. 

But  unless  the  evidence  clearly  establishes  that  the  award 
was  the  result  of  fraud  or  gross  mistake,  or  to  state  it  in 
another  way,  was  made  by  appraisers  who  were  incompetent, 
interested,  or  partial,  the  award  must  be  sustained.  Home 
Insurance  Co.  v.  Walter  (1921)— Tex.  Civ.  App.— 230  S.  W. 
723. 

And  where  the  appraisers  have  proceeded  in  strict  ac- 
cordance with  the  submission,  they  are  not  competent  wit- 
nesses, in  a  subsequent  action  on  the  policy  for  palpable 
mistake  and  fraud  on  the  part  of  the  insurer's  appraiser,  to 
impeach  their  own  award.  Eberhardt  v.  Federal  Insurance  Co., 
(1913),  14  Ga.  App.  340,  80  S.  E.  856. 

§41.  Failure  of  One  Appraiser  to  Sign  Award. — Where 
an  automobile  fire  policy  provided  that  the  award  of  two 
appraisers  and  umpire,  or  any  two  of  them,  in  the  event  of 
disagreement  as  to  the  amount  of  loss  or  damage,  should 
determine  the  amount  of  the  loss,  and  one  appraiser  failed 
to  sign  the  award  because,  having  fully  and  finally  con- 
sidered the  matter  with  his  fellows,  he  had  signified  his 
dissent  and  absolutely  refused  to  sign,  the  award  signed  by 
one  appraiser  and  the  umpire  was  admissible  in  evidence  in 
an  action  on  the  award.  Union  Marine  Insurance  Co.  v. 
Charlie's  Transfer  Co.  (1914)  186  Ala.  433,  65  So.  78. 

§  42.  Effect  of  Refusal  to  Arbitrate. — An  insurance  com- 
pany is  not  liable  for  statutory  penalties  under  the  Louisiana 


ARBITRATION,  APPRAISAL  AND  AWARD        37 

Act  No.  168  of  1908  for  withholding  the  amount  of  liability 
admitted  by  the  agent  or  adjuster  of  the  company,  as  long 
as  the  insured  demands  the  payment  of  a  larger  sum  and 
refuses  to  submit  to  an  appraisement  under  the  terms  of 
the  policy.  Hart  v.  Springfield  Fire  &  Marine  Insurance 
Co.  (1914)  136  La.  114,  66  So.  558. 

§42a.  Proceedings  in  Appraisement. — It  is  not  necessary 
for  either  party  to  the  submission  to  have  notice  of  the 
meeting  of  the  appraisers,  or  an  opportunity  to  present  evi- 
dence, where  there  is  no  provision  in  either  the  policy  or  in 
the  submission  for  such  notice,  or  for  the  parties  to  have 
the  opportunity  to  submit  evidence  upon  the  questions  at 
issue.  Eberhardt  v.  Federal  Insurance  Co.,  (1913,)  14  Ga. 
App.  340,  80  S.  E.  856;  Home  Insurance  Co.  v.  Walter,  (1912) 
—Tex.  Civ.  App.— 230  S.  W.  723. 

The  fact  that  the  umpire  did  not  participate  in  the  delibera- 
tions until  after  disagreement  between  the  appraisers  arose 
does  not  affect  the  validity  of  the  award,  in  the  absence  of 
a  requirement  in  the  policy  or  in  the  arbitration  agreement 
requiring  his  continuous  participation  from  the  beginning. 
Home  Insurance  Co.  v.  Walter  (1921 — Tex.  Civ.  App. — 230 
S.  W.  723. 

§42b.  Sufficiency  of  Award. — Under  an  open  policy  the 
insurer  had  the  right  either  to  pay  to  the  insured  the  actual 
amount  of  the  loss  or  to  repair  the  automobile  and  put  it 
in  the  same  condition  it  was  in  before  the  fire.  The  parties 
being  unable  to  agree  upon  the  loss  an  agreement  for  ap- 
praisement was  entered  into,  to  determine  "the  sound  value 
and  damage  upon  the  property."  The  appraisers  made  an 
award  determining  "the  sound  value  to  be :  value  of  the  car 
at  present  time,  $25;  value  of  the  car  before  the  fire,  $300; 
and  the  damage  to  be,  cost  of  repairs  to  car,  including  new 
parts  for  body  and  new  body,  wind-shield  and  top,  $1,284.30." 
It  was  held  in  an  action  on  the  policy,  that  the  words  "sound 
value  and  damage,"  as  used  in  the  submission,  were  synomy- 
ous  with  the  words  "the  amount  of  loss"  which,  under  the 


38  AUTOMOBILE  INSURANCE  LAW 

policy,  was  the  question  to  be  determined  by  the  submission. 
When  the  value  of  the  machine  immediately  before  the  fire 
was  fixed,  the  difference  between  these  two  sums  represented 
the  loss  which  the  insured  had  sustained.  The  award  fur- 
nished sufficient  data  to  enable  the  insurer  to  exercise  its 
option  to  repair.  It  was  unambiguous,  was  in  strict  accord- 
ance with  the  agreement  of  submission  and  was  binding  upon 
the  parties.  Eberhardt  v.  Federal  Insurance  Co.  (1913)  14 
Ga.  App.  340,  80  S.  E.  856. 


CHAPTER  VII 

Extent  of  Loss  and  Option  to  Repair 

§  43.  Expert  Testimony  as  to  Extent  of  Loss. 

§  44.  Cost  of  Repairs. 

§  45.  Effect  of  Offer  to  Repair. 

§  46.  Time  Within  Which  Offer  is  Available  to  Company. 

§  47.  Company's  Liability  for  Delay  in  Repairs. 

§  48.  Evidence  as  to  Repairability. 

§43.  Expert  Testimony  as  to  Extent  of  Loss. — Whether 
or  not  an  insured  automobile  damaged  in  a  collision  with 
another  automobile  was  or  was  not  a  total  loss  is  a  proper 
subject  for  expert  testimony.  Wolff  v.  Hartford  Fire  Ins. 
Co.  (1920)— Mo.  App.— 233  S.  W.  810.  Where  the  testimony 
in  an  action  on  a  collision  policy  showed  that  the  insured 
automobile  was  very  much  damaged  by  the  collision  the  in- 
sured was  held  entitled  to  a  judgment  for  at  least  nominal 
damages  although  the  evidence  of  his  witness  as  to  cost  of 
repairs  was  excluded  because  of  his  failure  to  qualify  as  an 
expert.  Wilson  Bryant  Co.  v.  Agricultural  Ins.  Co.  of  Water- 
town,  (1918)  171  N.  Y.  Supp.  218. 

§  44.  Cost  of  Repairs. — Under  a  policy  providing :  "The 
Corporation  shall  not  in  any  event  be  liable  under  this  pro- 
vision for  more  than  *  *  *the  actual  cost  of  the  suitable 
repair  of  the  property  injured,"  it  was  held  that  this  lan- 
guage indicated  that  the  contemplation  of  the  parties  was 
that  the  measure  of  damages  should  be  the  actual  cost  of 
repair,  and  that  the  trial  court  properly  permitted  damages 
to  be  shown  by  proving  the  cost  of  the  repairs  and  that 
they  were  reasonably  worth  the  amount  of  the  charge. 
Items  in  such  charges  should  be  specifically  objected  to  at 

39 


40  AUTOMOBILE  INSURANCE  LAW 

the  trial  to  permit  of  the  objections  being  considered  on  ap- 
peal. Lepman  v.  Employers'  Liability  Assurance  Co.  (1912) 
170  111.  App.  379. 

An  indemnity  insurance  policy  insured  against  loss  by 
reason  of  liability  imposed  by  law  for  the  destruction  of  or 
injury  to  the  property  of  others  arising  from  the  insured's 
ownership,  maintenance  or  use  of  certain  automobiles.  A 
clause  of  the  policy  provided  that  "The  company's  liability 
*  *  *  is  limited  to  the  actual  damage  or  destruction,  which 
shall  not  be  greater  than  the  actual  cost  of  the  repair  or 
replacement  thereof."  One  of  the  insured's  automobiles 
collided  with  another  car  and  damaged  it,  under  circum- 
stances rendering  the  insured  liable.  The  insurance  com- 
pany paid  the  owner  of  the  injured  car  the  amount  of  the 
bill  for  repairs  paid  by  him.  Thereafter  the  owner  of  the 
injured  car  recovered  a  judgment  against  the  insured  for 
the  depreciation  in  the  value  of  his  car  caused  by  the  acci- 
dent over  and  above  the  amount  paid  for  repairs.  The  in- 
sured paid  this  judgment  and  sued  the  insurance  company  to 
recover  the  amount  so  paid,  with  attorney's  fees.  The  court 
below  gave  judgment  for  the  insurance  company,  but  on 
appeal  a  majority  of  the  Minnesota  Supreme  Court  held 
that  the  limitation  clause  above  quoted  does  not  limit  the 
liability  of  the  insurance  company  to  the  actual  cost  of  re- 
pairs made,  when  it  appears  that  they  do  not  and  cannot 
make  the  car  as  good  as  it  was  before  the  accident,  and  that 
the  insured  may  recover  the  amount  of  the  judgment  paid 
by  him  for  depreciation  in  the  value  of  the  car,  with  at- 
torney's fees  incurred  in  defending  the  suit. 

The  writer  of  the  opinion,  Mr.  Justice  Bunn,  with  whom 
concurred  Mr.  Chief  Justice  Brown,  took  a  contrary  view, 
saying:  "But  for  the  limitation  clause  there  would  be  no 
doubt  of  the  liability  of  the  insurer.  Was  it  intended  by 
the  limitation  clause  to  preclude  liability  when  the  insured 
was  compelled  to  pay  for  injuries  that  could  not  be  remedied 
by  mechanical  repairs?  Is  this  clause  so  free  from  am- 


EXTENT  OF  LOSS  AND  OPTION  TO  REPAIR       41 

biguity  that  it  is  necessary  to  so  construe  it?  To  repair  an 
automobile  means  to  restore  it  to  a  sound  or  good  state  after 
injury  or  partial  destruction,  to  restore  it  to  its  original 
condition.  'Replacement'  has  much  the  same  meaning,  but 
as  used  would  seem  to  refer  to  cases,  where  property  is  de- 
stroyed rather  than  merely  damaged,  where  repairs  only  will 
not  restore  it  to  its  original  condition.  But  there  are  many 
articles  of  property  which  are  never  again  of  the  same  value 
after  injury  and  repair.  It  would  be  often  impossible  to 
restore  a  damaged  article  to  its  original  condition  by  re- 
pairing it.  It  was  not  possible  to  make  Brown's  car  as  good 
as  it  was  before  it  was  damaged.  But  all  was  done  that 
was  possible  to  this  end,  without  buying  him  a  new  car. 
The  members  of  the  court  are  divided  in  their  opinions  as 
to  whether  the  decision  of  the  trial  court  is  sound.  The 
writer  thinks  that  under  the  clause  providing  that  the  lia- 
bility of  the  insurer  is  limited  to  the  actual  value  of  the 
property  damaged  or  destroyed,  'which  shall  not  be  greater 
than  the  actual  cost  of  repair  or  replacement  thereof,'  de- 
fendant is  not  liable  beyond  the  amount  actually  paid  by 
Brown  for  repairs  to  his  car.  A  majority  of  the  court  thinks 
that  this  is  too  narrow  a  construction  of  the  language  of 
the  limitation  clause,  that,  where  there  are  damages  to  the 
property  that  are  not  and  cannot  be  fully  remedied  by  re- 
pairing it,  there  is  a  liability  for  the  full  loss,  limited,  of 
course,  by  the  money  limit  specified.  We  have  found  no 
authorities  that  are  helpful,  and  were  cited  to  none.  The 
view  of  a  majority  of  the  court  leads  to  a  reversal."  Christi- 
son  v.  St.  Paul  Fire  &  Marine  Insurance  Co.  (1917)  138  Minn. 
51. 

§45.  Effect  of  Offer  to  Repair.— By  the  exercise  of  the 
option  to  repair  the  automobile,  in  which  the  insured  is 
bound  to  acquiesce,  the  original  contract  of  the  parties  is 
converted  into  a  new  one  on  the  part  of  the  insurer  to  repair 
the  car  and  restore  it  to  its  former  condition.  The  contract 
to  pay  the  loss  is  thus  superseded  by  the  contract  to  repair. 


42  AUTOMOBILE  INSURANCE  LAW 

The  insured  no  longer  has  a  right  of  action  upon  the  former ; 
his  sole  remedy  is  upon  the  new  contract.  Letendre  v.  Auto- 
mobile Insurance  Co.  of  Hartford,  Conn.  (1921) — R.  I. — 
112Atl.  782. 

In  a  recent  Canadian  case  it  is  held  that  an  insured  against 
collision  cannot  succeed  in  an  action  on  the  policy  where  his 
car  has  been  damaged  by  collision  where  the  insurance  com- 
pany makes  an  offer  to  repair  the  damages  in  accordance 
with  the  terms  of  the  policy,  giving  the  company  the  right 
to  replace  or  repair  the  damaged  property  or  pay  for  it  in 
money.  Subsequent  to  the  accident  in  respect  of  which 
damages  were  claimed  the  car  was  examined  by  an  agent 
of  the  company,  who  was  of  the  opinion  that  the  car  could 
be  satisfactorily  repaired  in  Montreal,  and,  on  behalf  of  the 
company,  elected  to  repair  the  car  there.  The  insured  refused 
to  deliver  the  car  for  this  purpose  on  the  ground  that  he 
feared  they  would  not  repair  it  fully  and  completely,  but 
expressed  willingness  to  have  it  sent  to  the  factory  of  the 
makers  at  Detroit.  The  trial  judge  held  that  the  position 
taken  by  the  company  was  the  sound  one,  and  that,  the  com- 
pany having  exercised  its  option,  the  insured  was  bound  to 
deliver  the  car,  if  he  desired  to  avail  himself  of  his  rights 
under  the  contract,  and  if,  upon  the  return  of  the  car,  he 
was  advised  that  the  contract  had  not  been  complied  with, 
he  would  then  have  his  legal  remedy.  Also,  that  the  elec- 
tion to  repair  having  been  made,  a  tender  to  pay  in  cash, 
made  subsequently,  was  made  without  prejudice.  Judgment 
for  the  company  was  affirmed  by  a  divided  court.  Those  for 
dismissing  the  appeal  held  that  the  insured  came  to  his  con- 
clusion too  soon  that  the  company  would  not  repair  the  car 
satisfactorily,  and  that  he  was  not  justified  in  refusing  to 
allow  the  company  to  have  the  car.  Sare  v.  United  States 
Fidelity  &  Guaranty  Co.  (1919)  U.  S.  Sup.  Ct.,  50  Dominion 
Law  Rep.  573. 

An  automobile  truck  insured  on  a  valued  policy  for  $2,500 
having  been  badly  damaged  by  fire,  the  insurance  company 


EXTENT  OF  LOSS  AND  OPTION  TO  REPAIR       43 

offered  to  settle  the  claim  for  $2,000  or  repair  the  car.  The 
insured  accepted  the  latter  offer,  provided  the  repairs  were 
not  delayed  too  long,  and  the  car  was  taken  by  the  insurance 
company  to  have  the  repairs  made.  The  company  did  not 
give  the  insured  any  assurance  as  to  the  length  of  time 
necessary  to  make  the  repairs.  It  merely  made  an  estimate 
of  the  time  at  about  four  weeks.  The  insured  never  made 
complaint  that  the  work  was  unreasonably  delayed  or  that 
the  car  when  repaired  was  not  as  good  as  it  was  before  the 
fire.  Two  months  after  the  repair  work  was  commenced 
the  insurance  company  tendered  the  car  for  delivery,  free  of 
expense.  The  insured  did  not  acknowledge  the  company's 
letter,  but  remained  silent  for  upwards  of  five  months,  when 
they  commenced  action  to  recover  $2,500  under  the  policy 
for  a  total  loss  of  the  car.  The  New  York  Court  of  Ap- 
peals held  the  complaint  was  properly  dismissed.  The 
election  of  the  insured  to  have  the  car  repaired  and  the  in- 
surance company's  undertaking  to  make  the  repairs  within 
a  reasonable  time  created  a  contractual  relation  between 
the  parties  which  terminated  all  rights  of  both  parties  under 
the  policy  contract.  Such  substituted  contract  deprived  the 
insurance  company  of  asserting  any  right  or  option  it  had 
under  the  policy  and  deprived  the  insured  under  the  circum- 
stances of  the  case  of  any  right  to  assert  a  claim  under  the 
policy.  The  only  remedy,  if  any,  either  party  thereafter 
had  was  for  breach  of  the  new  or  substituted  contract. 
Gaffey  v.  St.  Paul  Fire  &  Marine  Insurance  Co.  (1917)  221 
N.  Y.  113. 

§  46.    Time  Within  Which  Offer  is  Available  to  Company. 

— Under  a  policy  giving  the  insurance  company  the  option 
to  repair,  rebuild  or  replace  the  property  lost,  providing 
that  the  company  gives  notice  of  its  desire  to  exercise  this 
option  within  thirty  days  after  the  receipt  of  the  sworn 
statement  of  loss,  the  company  cannot,  after  the  expiration 
of  the  thirty  days,  insist  upon  the  right  to  rebuild  or  replace 


44  AUTOMOBILE  INSURANCE  LAW 

the  car.    Gross  v.  Germania  Fire  Insurance  Co.   (1920)  29 
Pa.  Superior  Ct.  879. 

§47.  Company's  Liability  for  Delay  in  Repairs. — A  com- 
pany which  exercises  its  option  to  repair  is  liable  for  un- 
reasonable delay  in  making  the  repairs,  and  for  depreciation 
through  improper  care  during  repairs.  If  the  insurance  com- 
pany, instead  of  paying  the  damage  caused  by  fire  under  the 
policy,  elects,  under  thej  terms  of  the  policy,  to  repair  the 
automobile  and  return  it  in  as  good  condition  as  it  was  in 
just  prior  to  the  fire,  testimony  is  admissible  to  show  the 
loss  of  profits  sustained  by  reason  of  the  repairs  to  the 
automobile  not  being  made  within  a  reasonable  length  of 
time,  and  its  depreciation  in  value  caused  by  improper  hous- 
ing. Letendre  v.  Automobile  Insurance  Co.  of  Hartford, 
Conn.  (1921)— R.  I.— 112  Atl.  782,  citing  Winston  v.  Arlington 
Fire  Insurance  Co.  (1908)  32  App.  D.  C.  61,  20  L.  A.  R. 
(N.  S.)  960  16  Ann.  Cas.  104. 

§  48.  Evidence  as  to  Repairability. — One  who  has  been 
in  the  automobile  salvage  business  for  two  years  prior  to  the 
trial  and  has  had  twelve  years  of  experience  in  the  auto- 
mobile business ;  who  purchased  the  car  in  question  from  the 
plaintiff  insured  prior  to  the  trial  and  junked  it  for  the  pur- 
pose of  selling  such  parts  thereof  as  had  any  value;  and 
who  testified  that  he  had  carefully  examined  it  when  he 
received  it  to  determine  its  condition,  enumerating  the  parts 
destroyed  or  injured,  was  held  sufficiently  qualified  to  testify 
as  an  expert  on  the  question  of  whether  or  not  the  auto- 
mobile in  question  could  be  repaired  so  as  to  operate  proper- 
ly as  an  automobile.  A  witness  whose  testimony  disclosed 
that  he  had  been  engaged  in  the  automobile  business  for 
seven  years  was  held  sufficiently  qualified  to  testify  on  the 
same  question.  Where  two  expert  witnesses  testified  that 
the  automobile  insured  and  damaged  in  a  collision  could  not 
be  repaired  so  as  to  operate  properly,  but  admitted,  on  cross- 
examination,  that  each  and  every  injured  or  destroyed  part 
of  the  automobile  (which  parts  in  fact  aggregated  but  a 


EXTENT  OF  LOSS  AND  OPTION  TO  REPAIR       45 

small  portion  of  the  whole  of  the  automobile)  could  have 
been  repaired  or  replaced,  it  was  held  that  this  evidence  did 
not  warrant  the  submission  of  the  case  to  the  jury  upon  the 
theory  that  the  automobile  was  totally  destroyed.  Wolff  v. 
Hartford  Fire  Ins.  Co.  (1920)— Mo.  App.— 223  S.  W.  810.  A 
mechanic  was  held  not  to  have  sufficient  knowledge  of  the 
cost  of  repairs  to  an  automobile  of  the  particular  make 
owned  by  the  plaintiff  to  be  able  to  testify  as  an  expert. 
Callahan  v.  London  &  Lancashire  Fire  Insurance  Co.  (1917) 
98  Misc.  (N.  Y.)  589,  163  N.  Y.  Supp.  322. 


CHAPTER  VIII. 

Representations  and!  Warranties 

§49.  In  General. 

§50.  Representation  made  Warranty. 

§51.  Materiality  of  Representations. 

§52.  Misrepresentations — Intent  to  Deceive. 

§53.  Misrepresentations  as  to  Cost  of  Automobile. 

§54.  Misrepresentations  as  to  Price  May  be  Question  for  Jury. 

§55.  Knowledge  by  Company's  Agent  of  Cost. 

§56.  Misrepresentations  as  to  Year  Model. 

§57.  Same — Good  Faith  of  Insured  Immaterial. 

§58.  Same — Inspection  by  Company's  Agent. 

§59.  Same — May  be  Question  for  Jury. 

§60.  Identification  of  Automobile. 

§61.  Renting  and  Hiring  Warranties. 

§62.  Same — Warranties  Apply  Both  to  Mortgagor  and  Mortgagee. 

§63.  Same — Occasional  Use  for  Hire  Hejd  No  Breach. 

§64.  Same — Effect  of  Statute  Abolishing  Warranties. 

§65.  Same — Violation  for  Jury — Burden  of  Proof. 

§66.  Location  of  Automobile — "Private  Garage." 

§67.  Waiver  of  Location  Warranty. 

§68.  Misrepresentations  as  to  Other  Insurance. 

§69.  Other  Insurance  Does  Not  Necessarily  Forfeit  Policy. 

§70.  Misrepresentations   as   to    Ownership. 

§71.  Change  of  Ownership. 

§72.  Waiver  of  Conditions  as  to  Ownership. 

§72a.  Incumbrances. 

§  49.  In  General. — The  word  "misrepresentations,"  as  used 
in  automobile  and  other  insurance  policies,  is  taken  in  the 
same  sense  as  it  is  ordinarily  used  by  the  laity,  and  it  is 
therefore  not  a  technical  term.  Webster  defines  misrepre- 
sentation as,  "Untrue  representation,  false  or  incorrect  state- 
ments or  account;"  and  misrepresent  as  "To  represent  in- 
correctly *  *  *  to  give  a  false  or  erroneous  representation  of, 
either  maliciously,  ignorantly  or  carelessly."  Misrepresen- 
tation, as  used  in  insurance  law,  means  "a  false  statement 
touching  matters  material  to  the  risk,"  and  it  is  immaterial 
whether  the  misstatement  resulted  from  bad  faith  or  from 

46 


REPRESENTATIONS  AND  WARRANTIES          47 

accident  or  ignorance.  The  burden  of  proving  false  rep- 
resentations pleaded  by  the  company,  as  well  as  their 
materiality,  is  held  to  be  upon  the  company.  Zackwik  v. 
Hanover  Fire  Ins.  Co.  (1920)— Mo.  App.— 225  S.  W.  135, 
citing  Smith  v.  American  Automobile  Ins.  Co.,  188  Mis.  App. 
279,  304,  175  S.  W.  113,  115;  British  &  Foreign  Marine  In- 
surance Co.  v.  Cummings  (1910)  113  Mod.  350,  76  Atl.  571. 

§  50.  Representation  Made  Warranty. — Ordinarily  a  mis- 
representation of  the  assured  will  not  affect  the  validity  of  a 
policy  unless  it  is  material  to  the  risk,  or,  by  the  terms  of 
the  application  and  policy,  has  become  an  affirmative  war- 
ranty. When  the  parties  by  the  terms  of  their  contract 
expressly  stipulate  that  a  representation'  shall  be  regarded 
as  material,  it  ceases  to  be  a  representation  only,  and  be- 
comes a  warranty.  "When  a  policy  is  issued  on  the  faith  of 
representations  of  the  assured  as  to  existing  facts,  such 
representations  become  warranties,  with  the  result  that,  if 
they  be  not  strictly  true  as  made,  the  policy,  without  regard 
to  their  materiality,  will  not  take  effect.  The  parties  being 
agreed  upon  the  materiality  of  the  statements  warranted, 
are  thereafter  precluded  from  questioning  their  materiality." 

In  an  application  for  an  automobile  fire  policy  the  descrip- 
tion was  "hereby  made  a  warranty  by  the  applicant"  and  the 
policy  made  the  statements  in  the  application  a  warranty  and 
part  of  the  policy.  A  stipulation  was  also  contained  in  the 
policy  that  it  should  be  void  for  concealment  or  misrepre- 
sentation of  material  facts.  Statements  in  the  application 
that  the  car  was  new  and  had  cost  $4,300  were  shown,  in  an 
action  on  the  policy,  to  be  untrue.  It  was  ;held  the  state- 
ments were  warranties  and  not  representations,  and  no  re- 
covery could  be  had  on  the  policy.  Miller  v.  'Commercial 
Union  Assurance  Co.  (1912)  69  Wash.  529,  125  Pac.  782. 

§51.  Materiality  of  Representations. — Whenever  the  mis- 
representation would  have,  or  might  have,  a  real  influence 
upon  the  underwriter  either  not  to  underwrite  at  all,  or  not 


48  AUTOMOBILE  INSURANCE  LAW 

to  underwrite  except  at  a  higher  premium,  it  must  be  deemed 
material  to  the  risk.  Smith  v.  American  Automobile  Insur- 
ance Co.  (1915)  188  Mo.  App.  297,  175  S.  W.  115.  The  question 
of  materiality  is  usually  for  the  jury  to  determine ;  "except 
in  such  clear  cases  as  can  be  determined  by  the  court  as  a 
matter  of  law."  Smith  v.  Automobile  Insurance  Co.  (1915) 
188  Mo.  App.  297,  175  S.  WL  115;  Locke  v.  Royal  Insurance 
Co.  (1915)  220  Mass.  202,  107  N.  E.  911 ;  Orient  Insurance  Co. 
v.  Van  Zandt-Bruce  Drug  Co.  (1915)  50  Okla.  558,  151  Pac. 
323;  Traynor  v.  Automobile  Mutual  Insurance  Co.  (1921) — 
Neb.— 181  N.  W.  566. 

In  an  action  on  an  automobile  fire  policy  the  North  Carolina 
Supreme  Court  holds  that  every  fact  stated  in  the  application 
for  such  a  policy  will  be  deemed  material  which  would  materi- 
ally influence  the  judgment  of  an  insurance  company  either 
in  accepting  the  risk  or  in  fixing  the  rate  of  premium.  '  To 
defeat  recovery,  it  is  not  necessary  that  a  material  misrepre- 
sentation by  the  applicant  must  be  shown  to  have  contributed 
in  some  way  to  the  loss  for  which  indemnity  is  claimed. 
Lummus  v.  Fireman's  Fund  Insurance  Co.  (1914)  167  N. 
Car.  654,  83  S.  E.  688. 

Section  2565  of  the  California  Code  provides  that  "Materi- 
ality is  to  be  determined  not  by  the  event,  but  solely  by  the 
probable  and  reasonable  influence  of  the  facts  upon  the  party 
to  whom  the  communication  is  due,  in  forming  his  estimate 
of  the  disadvantage  of  the  proposed  contract,  or  in  making 
his  inquiries."  Solomon  v.  Federal  Insurance  Co.  (1917)  176 
Cal.  133,  167  Pac.  859. 

§  52.  Misrepresentations — Intent  to  Deceive. — In  an  action 
on  an  automobile  fire  policy,  the  insurance  company,  as  a 
defense,  relied  upon  the  fact  that  the  owner,  at  the  time  the 
insurance  was  obtained,  represented  that  the  automobile,  a 
Winton  car,  was  manufactured  in  the  year  1911,  and  that  when 
purchased  by  the  insured  in  October,  1911,  it  was  new  and 
had  cost  the  insured  $3,400,  whereas,  in  fact,  the  automobile 
was  a  1910  model,  and  when  purchased  by  the  insured  was 


REPRESENTATIONS  AND  WARRANTIES          49 

a  secondhand  car,  and  had  cost  her  $2,000,  $800  paid  in  cash 
and  $1,200  in  trade;  that  had  the  insurance  company  known 
the  car  was  a  1910  model,  or  a  secondhand  car,  or  that  it  had 
cost  the  insured  only  $2,000,  the  policy,  which  was  for  $1,000, 
would  not  have  been  issued.  The  contract  of  purchase  be- 
tween the  insured  and  the  Winton  company  described  the  car 
as  a  1910  model.  The  premium  on  secondhand  cars  is  higher 
than  on  new  cars,  and  the  Washington  insurance  law  requires 
schedules  of  rates  to  be  filed  with  the  insurance  commission, 
deviation  from  which  renders  the  insurance  company  guilty 
of  a  misdemeanor.  The  insured's  husband  knew  that  the 
car  was  secondhand,  and  admitted  that  he  represented  it  as  a 
new  car,  but  denied  that  he  knew  it  was  a  1910  model,  or  he 
had  forgotten  the  actual  date  of  manufacture.  The  insured 
relied  upon  the  Washington  statute,  section  6059-34  Rem. 
Code,  providing  that  misrepresentations  or  warranties  shall 
not  be  deemed  material  or  defeat  the  policy,  unless  made  with 
the  intent  to  deceive ;  and  argued  that  although  these  repre- 
sentations were  made  with  knowledge  of  their  falsity,  it  was 
a  question  for  the  jury  to  determine  as  to  whether  they  were 
made  with  intent  to  deceive. 

It  was  held  that  the  rule  that  intent  accompanying  false 
and  fraudulent  statements  should  be  submitted  to  the  jury 
"should  not  be  so  far  extended  as  to  include  a  case  such  as 
this,  and  allow  insurance  to  be  enforced  which  was  not  pro- 
curable had  the  truth  been  told,  where  it  was  issued  relying 
upon  fraudulent  statements,  and  the  proof  of  honest  intent 
consists  merely  in  the  applicant's  bare  affirmation  that  his  in- 
tent was  honest.  The  proof  of  the  making  of  false  and  fraudu- 
lent representations  raises  a  presumption  of  dishonest  motive 
which  must  be  overcome  by  evidence  establishing  an  honest 
motive.  It  is  true  that  motive  and  intent  are  mental  states, 
and  that  evidence  of  the  mental  state  of  an  applicant  is  some- 
times hard  to  prove  where  there  are  no  other  facts  or  cir- 
cumstances to  establish  it  other  than  the  applicant's  own 
declaration^  However,  honesty  and  fair  dealing  would  seem 


50  AUTOMOBILE  INSURANCE  LAW 

to  require  that,  in  order  to  overcome  the  presumption,  there 
must  be  some  testimony  more  concrete  than  was  here  given 
when  an  applicant  admits,  as  he  does  here,  that  the  represen- 
tations were  made  with  the  knowledge  that  they  were  un- 
true. It  may  be  that  representations  made  at  a  time  when 
the  applicant  may  have  forgotten  the  facts,  or  made  through 
carelessness  or  mistake,  or  where  the  representative  of  the 
insurance  company  had  prior  knowledge  of  the  facts  which 
were  contrary  to  the  representations  made  by  the  applicant, 
make  submissible  to  the  fury  the  question  of  whether  the 
applicant  acted  with  intent  to  deceive  or  not.  In  this  case  the 
respondent  (the  owner)  admits  that  the  statements  were 
'material  enough  to  avoid  the  policy  if  there  was  an  intent 
to  deceive/  and,  they  having  been  made  with  knowledge  of 
their  falsity,  a  presumption  arises  of  the  intent  to  deceive, 
which  presumption  is  not  overcome  by  the  unsupported  declar- 
ation of  the  applicant  that  no  such  intent  existed  in  his  mind 
at  the  time."  It  was  therefore  held  that  the  insurance  com- 
pany's motion  for  judgment  notwithstanding  verdict  for  the 
plaintiff  should  have  been  granted.  Day  v.  St.  Paul  Fire  & 
Marine  Ins.  Co.  (1920)— Wash.— 189  Pac.  95. 

§  53.     Misrepresentations  as  to  Cost  of  Automobile. — The 

California  Supreme  Court  says  in  Solomon  v.  Federal  Ins.  Co. : 
"The  purchase  price  of  a  second-hand  automobile  is  particu- 
larly important  in  a  valued  policy,  as  it  must  be  manifest  that 
an  insurance  company  will  not  agree  to  pay,  say,  $3,000  for 
the  loss  of  an  automobile  which  cost  the  insured  but  $2,500. 
This  is  not1  a  case  of  overestimating  the  value  of  the  thing 
insured,  which  in  an  open  policy  is  not  necessarily  fatal ;  here 
we  have  the  statement  of  a  fact,  the  price  the  insured  paid  for 
the  car.  No  question  of  mistaken  opinion  is  involved.  Where 
a  valued  policy  is  issued  upon  ;the  basis  of  the  application 
alone,  as  in  this  case,  it  is  difficult  to  see  what  could  be  more 
important  to  the  insurer  in  determining  the  amount  of  the 
policy  than  positive  statements  of  the  year  in  which  the  car 


REPRESENTATIONS  AND  WARRANTIES  51 

was  built  and  the  price  paid  for  it  by  the  insured."     Solomon 
v.  Federal  Insurance  Co.  (1917)  176  Cal.  133,  167  Pac.  859. 

In  an  action  on  an  open  policy,  the  Texas  Court  of  Civil 
Appeals  said:  "Generally  stated,  a  fact  would  be  material  to 
the  insurance  risk  which  would  induce  the  insurance  company 
to  decline  the  .insurance  altogether,  or  not  to  accept  it  at  a 
higher  premium."  Where  a  car  insured  against  fire  was  rep- 
resented to  have  been  run  a  few  months  less  than  it  had  been 
and  to  have  been  purchased  for  a  sum  stated,  instead  of  trad- 
ed, and  it  appeared  that  the  matters  stated  did  not  have  an 
effect  upon,  and  could  not  have  changed,  the  rate  of  premium 
charged  if  correctly  given,  it  was  held  they  were  not  material 
to  the  risk.  St.  Paul  Fire  &  Marine  Ins.  Co.  v.  Huff  (1915)— 
Tex.  Civ.  App. — 172  S.  W.  755.  A  defense  to  an  action  on  an 
automobile  fire  policy  alleged  fraud  in  that  the  application 
had  represented  that  the  car,  a  Velie,  was  obtained  by  ex- 
changing a  Ford  and  money  therefor,  whereas  in  fact  the 
Ford  car,  with  cash,  was  first  exchanged  for  a  Crow  Elkhart 
automobile,  and  the  latter,  with  boot  money,  traded  for  the  car 
insured.  The  court  said  that  possibly  the  son  of  the  insured, 
who  did  the  trading,  found  it  necessary,  in  order  to  substi- 
tute the  Velie  automobile  for  the  Ford  car,  to  first  exchange 
the  Crow  Elkhart  car,  and  then  for  that  in  question.  The 
answer  may  have  been  made  on  that  theory.  Whether  so  or 
not,  the  record  was  found  to  contain  nothing  tending  to  show 
a  dishonest  motive,  or  that  the  insurer  was  misled  by  the  in- 
accuracy of  the  answer.  The  charge  of  fraud  was  therefore 
denied.  White  v.  Home  Mut.  Ins.  Ass'n  of  Iowa  (1920) — 
Iowa— 179  N.  W.  315. 

§54.  Misrepresentation  as  to  Price  May  be  Question  for 
Jury. — It  may  be  a  question  of  fact  for  the  jury,  under  the 
evidence,  whether  or  not  any  misrepresentation  was  made 
about  the  car  being  paid  for  in  cash  and  also  as  to  whether 
such  a  misrepresentation,  if  made,  was  material  to  the  risk. 
And  where  the  insurance  company  contended  that,  if  its  solici- 
tor had  known  that  the  insured  had  not  paid  as  much  as  50 


52  AUTOMOBILE  INSURANCE  LAW 

per  cent,  of  the  value  for  the  car,  at  least  33  1/3  per  cent.,  the 
company  would  not  have  issued  the  policy,  but  the  testimony 
of  the  company's  witnesses  left  it  in  doubt  whether  the  policy 
would  have  been  issued  under  the  circumstances  of  the  case, 
where  the  automobile  dealer  who  sold  the  car  to  the  insured 
had  taken  notes  in  full  payment  of  the  machine,  it  was  held 
that  to  have  submitted  a  special  issue  requested  by  the  com- 
pany as  to  whether  the  car  was  fully  paid  for  and  to  have  had 
it  answered  in  the  affirmative  would  not  have  made  it  an 
ultimate  basis  for  a  judgment  for  the  defendant,  for  the  reason 
that  either  the  court  or  jury  must  have  followed  this  finding 
with  the  further  finding  that  such  a  misrepresentation  was 
material  to  the  risk  in  that  it  would  probably  not  have  issued 
the  policy  had  it  possessed  the  knowledge  and  the  latter  issue 
was  not  submitted.  California  Ins.  Co.  v.  Eads  (Tex.  Civ. 
App.  1919)  209  S.  W.  216. 

§55.  Knowledge  by  Company's  Agent  of  Cost. — If  an  agent 
of  the  insurance  company  was  informed  of  the  true  cost  of  the 
car,  and,  notwithstanding  this  knowledge,  procured  a  policy  to 
be  issued  by  the  insurance  company,  without  any  representa- 
tion as  to  its  cost  on  the  part  of  the  owner,  it  is  held  that 
the  erroneous  statement  of  the  actual  cost  of  the  car  to  be 
$2,000  on  the  schedule  of  statements  endorsed  on  the  policy  is 
to  be  regarded  as  that  of  the  company  with  full  information, 
and  it  is  estopped  to  assert  the  contrary.  A  policy  insured 
an  automobile  against  loss  by  fire  in  the  amount  of  $1,750. 
On  its  total  destruction  by  fire  the  insurance  company  de- 
clined to  pay  the  loss,  because,  it  said,  the  insured  made  a 
false  and  fraudulent  representation  material  to  the  risk  with 
respect  to  the  cost  of  the  automobile  which  induced  the  is- 
suance of  the  policy  in  the  first  instance,  and  also  because  the 
policy  stipulated  a  warranty  in  respect  of  the  matter  of  the 
actual  cost.  No  written  application  was  executed  by  the  in- 
sured prior  to  the  issuance  of  the  policy,  but  a  schedule  of 
statements  endorsed  thereon  contained  the  following:  "Ac- 
tual cost  to  assured,  including  equipment — $2,000."  It  ap- 


REPRESENTATIONS  AND  WARRANTIES  53 

peared,  in  an  action  on  the  policy,  where  these  two  defenses 
were  made,  that  the  plaintiff  purchased  the  automobile  short- 
ly before  k  was  insured  at  the  price  of  $1,000.  It  was  a 
second-hand  touring  car  and  it  sold  originally,  when  new, 
for  some  $3,500  or  $4,000.  After  its  purchase  the  plaintiff 
added  to  it  other  equipment  at  an  outlay  of  $427.46,  so  that 
when  the  insurance  was  effected  the  automobile  had  actually 
cost  her  $1,427.46.  The  plaintiff,  however,  asserted  that  she 
made  no  representation  to  the  insurance  company  or  to  the 
broker  who  negotiated  the  insurance,  who  was  a  friend  of  the 
person  who  sold  her  the  automobile.  The  question  arose 
whether  this  broker  was  agent  for  the  plaintiff  or  the  insur- 
ance company  in  respect  of  the  representations.  It  was  held 
that,  the  company  being  accustomed  to  deal  with  the  broker 
and  pursuing  an  established  custom  of  trusting  to  representa- 
tions made  by  him,  having  made  him  its  agent  for  the  pur- 
pose of  delivering  the  policy,  collecting  the  premium,  com- 
pensating him  for  the  service  by  an  allowance  of  commission, 
and  having  established  and  pursued  a  custom  in  accepting  the 
representations  of  the  broker  as  to  such  material  matters  con- 
cerning the  property  insured,  the  broker  was  to  be  regarded 
as  the  agent  of  the  insurance  company  thereabout,  in  cases 
where  it  is  entirely  clear  that  he  is  in  no  manner  the  agent 
of  the  insured.  Farber  v.  American  Automobile  Insurance 
Co.  (1915)  191  Mo.  App.  307,  177  S.  W.  675.  In  a  later  case 
it  is  said  that  it  is  by  no  means  clear,  though  the  point  has 
not  been  expressly  decided,  that  the  insured,  after  retaining 
the  policy  for  a  year,  can  then  insist  that  a  misdescription 
of  the  car  insured,  sufficient  to  constitute  a  breach  of  war- 
ranty, was  the  act  of  the  insurance  company  and  entirely 
unknown  to  the  insured.  Solomon  v.  Federal  Insurance  Co. 
(1917)  176  Cal.  133,  137,  167  Pac.  859. 

§  56.  Representations  as  to  Year  Model.— Representations 
as  to  the  year  model  of  the  automobile  are,  as  a  rule,  held  to 
be  material.  An  automobile  fire  policy  contained  a  warranty 
that  the  car  was  a  model  of  1910.  The  car  was  burned  about 


54  AUTOMOBILE  INSURANCE  LAW 

a  month  after  it  was  insured.     In  an  action  on  the  policy  it 
was  agreed  that  the  machine  was  a  model  of  1907.    The  de- 
fense was  that  this  misrepresentation  and  warranty  rendered 
the  policy  void,  being  material  to  the  risk  and  therefore  not 
affected  by   Missouri   Revised   Statutes    1909,   section   7024, 
which  avoids  the  effect  of  all  other  warranties.    The   rate 
sheet  issued  by  the  insurance  company  to  its  agents,  and  by 
which  they  were  governed  in  writing  automobile  insurance, 
prohibited  the  writing  of  fire  insurance  upon  "any  car  prior 
to  1908  model."     It  allowed  liability   insurance  to  be  written 
on  cars  more  than  four  years  old  but  not  fire  insurance.    And 
the  testimony  was  that  no  fire  insurance  was  permitted  or 
written  on  cars  over  that  age.    The  rate  sheets  also  showed 
that  there  was  a  continuous  decrease  in  the  amount  of  insur- 
ance allowed  on  a  car  the  older  it  got  during  the  years  a  car 
was  insurable.     It  was  held  that  the  misrepresentation  was 
material  as  a  matter  of  law.     If  the  car  was  represented  to 
the  company  to  be  only  two,  when  it  was  five  years  old,  and 
the  company  had  no  means  nor  opportunity  of  knowing  dif- 
ferently, then  there  was  no  contract  of  insurance  entered  into 
by  the  compay  with  reference  to  the  car.    The  principle  in- 
volved was  more  than  the  question  whether  the  fire  was  at- 
tributable to  the  age  of  the  car.     If  that  were  the  question, 
then  of  course  it  would  be  for  the  jury  to  say  whether  the 
misrepresentation  was  material  to  the  risk.     But  the  material- 
ity depends  upon  whether,  had  the  true  facts  been  known, 
the  company  would  have  insured  it  at  all  or  would  have  limit- 
ed itself  to  the  premium  charged.     Smith  v.  American  Auto- 
mobile Insurance  Co.  (1915)  188  Mo.  App.  297,  175  S.  W.  115. 

To  describe  an  automobile  in  a  valued  policy  as  being  made 
in  1909,  when  in  fact  it  was  made  in  1908,  is  such  a  material 
misdescription  of  the  thing  insured  as  to  constitute  a  breach 
of  the  express  warranty  provided  for  in  section  2607  of  the 
California  Civil  iCode.  Solomon  v.  Federal  'Insurance  ^Co. 
(1917)  176  Cal.  133,  167  Pac.  859. 


REPRESENTATIONS  AND  WARRANTIES  55 

An  automobile  fire  policy  issued  in  October  1912  contained 
the  following  clause:  "This  entire  policy  shall  be  void  if  the 
insured  has  concealed  or  misrepresented,  in  writing  or  other- 
wise, any  material  fact  or  circumstance  concerning  this  in- 
surance or  the  subject  thereof."  The  statement  made  to  the 
insurance  company's  agents,  and  embodied  in  the  policy,  was 
that  the  automobile  was  a  No.  877  Premier,  40  horse  power, 
4  cylinder  touring  car,  built  in  1910.  In  fact  it  was  a  24  horse 
power  car,  capable  of  developing  29  horse  power,  and  built 
in  1906.  It  was  held  that  the  misrepresentation  that  the  car 
was  a  1910  model  was  clearly  a  misrepresentation  of  a  mater- 
ial fact.  "It  is  impossible  for  insurance  agents  to  ascertain 
the  condition  of  the  car  from  its  outside  appearance.  The 
condition  largely  depends  upon  the  wearing  of  the  gears, 
which  are  concealed  within  metal-bound  cases.  It  also  largely 
depends  upon  the  year  of  manufacture,  important  changes 
being  made  from  year  to  year  io  remedy  defects  and  to  add 
to  convenience  and  safety  in  the  use  of  the  cars.  It  is  a  mat- 
ter of  common  knowledge  that  in  1912  a  1910  Premier  was 
of  a  value  greatly  in  excess  of  a  1906  Premier  of  the  same 
model."  Reed  v.  St.  Paul  Fire  &  Marine  Ins.  Co.  (1915)  165 
N.  Y.  App.  Div.  660,  151  N.  Y.  Supp.  274. 

A  used  car,  constructed  in  1906,  and  insured  in  November, 
1909,  is  not  of  the  same  insurance  value  as  a  car  constructed 
in  1907,  and  the  statement  of  the  applicant  that  the  car  was 
of  the  1907  model  was  held  a  material  representation,  upon 
which  the  insurance  company  had  a  right  to  rely,  in  issuing 
a  valued  fire  policy  in  the  sum  of  $2,000.  Harris  v.  St.  Paul 
Fire  &  Marine  Ins.  Co.  (1920)  126  N.  Y.  Supp.  118. 

It  is  held  that  a  car  was  new  within  the  meaning  of  an  ap- 
plication for  insurance  wfaen  it  was  bought  by  the  employer 
of  the  plaintiff  insured  in  January  1915  for  the  plaintiff  and 
kept  in  the  employer's  garage,  the  title  remaining  in  the  em- 
ployer till  about  March  1,  when  the  plaintiff  was  able  to  pay 
for  the  machine,  and  which  was  then  insured.  Rabinowitz 
v.  Vulcan  Insurance  Co.  (1917)  90  N.  J.  L.  332,  100  Atl.  175. 


56  AUTOMOBILE  INSURANCE  LAW 

§  57.     Same — Good    Faith    of    Insured    Immaterial. — The 

fact  that  material  misrepresentation  as  to  the  age  of  the  car 
insured  was  innocently  made  does  not  change  or  affect  the 
matter.  When  the  insurer  makes  inquiry  about  facts  material 
to  the  risk,  he  is  justified  in  acting  upon  the  presumption 
that  the  information  imparted  by  the  applicant  is  correct.  The 
representations  of  the  applicant  become  the  basis  of  insur- 
ance, and  if  they  be  false,  touching  matters  material  to  the 
risk,  the  contract  obtained  through  their  influence  cannot  be 
enforced;  and  it  is,  in  such  case,  quite  immaterial  whether  the 
misstatement  resulted  from  bad  faith  or  from  accident  or 
ignorance.  Smith  v.  American  Automobile  Insurance  ,Co. 
(1915)  188  Mo.  App.  297,  175  S.  W.  115. 

§  58.  Same — Inspection  by  Company's  Agent. — An  inspec- 
tion of  the  car  by  the  insurance  company's  agent  will  not 
avoid  the  effect  of  a  material  representation  as  to  the  model 
of  the  car  where  there  are  no  means  of  telling  by  such  inspec- 
tion what  model  it  was.  Smith  v.  American  Automobile  In- 
surance Co.  (1915)  188  Mo.  App.  297,  175  S.  W.  115.  This  is  not 
inconsistent  with  the  decision  in  British  &  Foreign  Marine 
Insurance  Co.  v.  Cummings,  one  of  the  earlier  automobile 
insurance  cases,  where  it  appeared  that  application  for  a  fire 
policy  stated  that  the  automobile  was  built  in  1907  by  the 
Pope-Toledo  Company.  The  machine  was  examined  by  the 
company's  agent,  who  approved  the  application  and  a  policy 
was  issued.  The  car  was  destroyed  by  fire.  The  company 
denied  liability  because  the  machine  was  built  in  1906,  and 
on  cars  built  in  that  year  the  premium  was  higher,  and  the 
amount  of  insurance  allowed  was  less  than  on  those  built  in 
1907.  In  making  the  representation  as  to  the  year  the  in- 
sured acted  in  good  faith,  on  information  given  him  by  the 
vendor.  An  inspection  of  the  car  would  not  disclose  the  year 
of  manufacture,  but  its  number,  in  connection  with  the  manu- 
facturer's rules  and  catalogues,  would  have  shown  that  it  was 
made  in  1906.  It  was  held  that  the  representation  as  to  the 
year  was  not  a  warranty,  but  related  to  a  fact  which  was  not 


REPRESENTATIONS  AND  WARRANTIES  57 

especially  within  his  knowledge;  that  this  fact  could  and 
ought  to  have  been  ascertained  by  the  company's  agent  on  his 
examination,  and  that  the  representation  was  therefore  no  bar 
to  recovery  on  the  policy.  British  &  Foreign  Marine  Ins. 
Co.  v.  Cummings  (1910)  113  Md.  350,  76  Atl.  571. 

In  a  latej  case  it  appeared  that  while  the  application  er- 
roneously stated  1913  as  the  year  when  the  car,  a  Stearns, 
was  built,  it  correctly  stated  the  model  as  30-60,  and  thus  the 
application  put  in  possession  of  the  company  the  means  of 
learning  that  no  Stearns  automobiles  of  the  model  30-60  were 
built  after  the  year  1910,  or  early  in  1911.  With  this  informa- 
tion furnished  in  ithe  application,  it  was  held  that  it  could 
not  be  said  as  a  matter  of  law  that  the  company  was  de- 
ceived by  the  misstatement  of  the  year  in  which  the  car  was 
built.  Traynor  v.  Automobile  Mutual  Insurance  Co.  (1921) 
-Neb.—,  181  N.  W.  566. 

In  an  action  on  a  policy  where  the  defense  was  false  rep- 
resentations as  to  age  and  model,  the  company  was  not  es- 
topped from  making  such  defense  by  the  failure  of  its  local 
agent  to  leave  his  office  to  look  at  the  car  when  the  owner 
called  his  attention  to  the  fact  that  the  number  of  the  engine 
as  given  in  the  policy  was  wrong,  and  nothing  was  then 
known  to  create  suspicion  that  the  information  as  to  the  age 
of  the  car  was  false;  nor  was  the  company  estopped  from 
relying  on  the  misrepresentations  by  the  fact  that  in  a  subse- 
quent conversation  with  the  insurer's  agent  the  insured  did 
not  do  anything  further  to  mislead  the  company.  The  orig- 
inal act  of  misrepresentation  was  a  positive  one  and  of  such 
a  nature  as  to  invalidate  the  policy.  Day  v.  St.  Paul  Fire  & 
Marine  Ins.  Co.  (1920)— Wash.— 189  Pac.  95. 

§  59.  Same — May  Be  Question  for  Jury- — The  question 
whether  misstatements  as  to  the  year  model  are  material  may 
be,  under  the  evidence,  for  the  jury.  Two  actions,  tried  to- 
gether, were  based  on  three  fire  insurance  policies  over  cars 
destroyed  by  fire.  One,  issued  by  the  Royal  Insurance  Com- 
pany, was  in  the  non-valued  form  of  $1,500  on  a  Fiat  automo- 


58  AUTOMOBILE  INSURANCE  LAW 

bile.  The  others  were  valued  policies  issued  by  the  Columbia 
Insurance  Company,  one  for  $1,800  on  a  Hotchkiss  automobile, 
the  other  for  $650  on  another  Hotchkiss  car.  The  cars  were 
admittedly  worth  more  than  the  amounts  for  which  they 
were  insured.  The  substantial  defense  was  misdescription 
of  the  cars  in  the  application  and  policies,  with  reference  to  the 
year  model.  In  all  other  respects,  such  as  factory  number, 
type  of  body,  the  number  of  cylinders,  horse  power,  etc.,  the 
descriptions  were  conceded  to  be  correct.  The  defendants 
contended  that  while  the  cars  were  described  as  of  a  1908 
model,  the  Fiat  car  was  of  a  1907  model  and  the  two  Hotch- 
kiss cars  of  the  1906  model.  It  appeared  that  1908  was  speci- 
fied, not  as  the  "year  of  manufacture,"  but  as  the  "year 
model."  They  were  all  foreign  cars.  There  was  evidence 
that  foreign  makers  do  not  make  distinct  yearly  models,  as 
American  manufacturers  do,  and  that  at  that  time  European 
cars  used  to  be  designated  as  1905-1906,  1906-1907,  etc.,  and 
not  by  single  years.  There  was  also  testimony  that  the  dif- 
ference between  a  Hotchkiss  1906  and  a  1908  car  would  be 
hardly  discernible,  and  that  a  Fiat  car  of  1907  and  one  of  1908 
were  substantially  identical.  So  far  as  the  cases  jinvolved 
the  identification  of  the  automobile  insured,  the  jury  could 
find  that  the  minds  of  the  parties  were  in  accord.  There  was 
also  evidence  that  no  greater  premium  would  be  charged  for 
a  Fiat  1907  than  for  a  Fiat  1908,  and  that  therefore  the  mis- 
statement,  if  made,  did  not  increase  the  risk  of  loss  and  was 
immaterial.  The  Hotchkiss  cars  were  insured  as  "Dealers' 
Automobiles,"  and  admittedly  the  rate  was  properly  deter- 
mined by  adding  one  per  cent  to  the  basis  rate  for  new  cars, 
and  did  not  depend  upon  their  age.  It  was  held  that  the 
question  as  to  whether  the  misstatements  as  to  year  model 
were  material  was  for  the  jury,  which  found  for  the  plaintiff. 
Locke  v.  Royal  Insurance  Co.,  Ltd.  (1915)  220  Mass.  202,  107 
N.  E.  911. 

In  a  later  case  it  was  held  that  the  age  of.  an  automobile 
upon  which  insurance  is   sought  is  material  only  in  so  far 


REPRESENTATIONS  AND  WARRANTIES  59 

as  it  affects  its  value  and  thereby  the  moral  hazard  to  be  as- 
sumed by  the  company ;  and  where  an  applicant  for  insurance 
upon  a  second-hand  rebuilt  automobile  in  his  application  in- 
correctly states  the  year  in  which  the  car  was  originally  built, 
but  also  in  his  application  states  other  facts  from  which  the 
insurance  company,  by  ordinary  diligence,  could  have  ascer- 
tained the  correct  year,  it  cannot  be  said  as  a  matter  of  law 
that  the  insurance  company  was  "deceived  *  *  *  to  its  in- 
jury" within  the  meaning  of  section  3187,  Nebraska  Rev.  St. 
1913,  which  provides  that  no  misrepresentation  or  warranty 
is  to  be  deemed  material  or  sufficient  to  avoid  the  policy  un- 
less it  "deceived  the  company  to  its  injury."  Traynor  v.  Auto- 
mobile Mutual  Insurance  Co.  (1921)— Neb.— ,  181  N.  Y.  566. 
The  automobile  in  this  case  was  a  Stearns  built  in  1910, 
stated  by  the  applicant  to  have  been  built  in  1913.  The  model 
was  correctly  stated  as  Model  30-60.  The  evidence  showed 
that  the  Stearns  company  turned  out  no  Model  30-60  cars 
after  July  1,  1911.  The  car  itself  bore  no  evidence  of  when 
it  was  built.  The  car  had  been  practically  destroyed  by  fire 
and  partially  rebuilt  in  1913  and  in  1914  was  completely  re- 
built and  changed  from  a  four-passenger  touring  car  to  a  two- 
passenger  roadster.  The  court  said:  "The  only  materiality 
of  the  year  when  the  car  was  originally  built  was  as  it  affect- 
ed its  value  and  thereby  the  moral  hazard  of  the  risk  as- 
sumed by  the  company.  As  the  automobile  in  this  case  had 
been  partially  rebuilt  in  1913  and  completely  rebuilt  in  1914, 
the  year  when  it  was  originally  built  was  not  much  of  an 
index  to  its  real  value.  Originally  it  was  a  four-passenger 
touring  car  and  it  was  almost  entirely  changed.  It  might 
well  have  been  that  after  having  been  rebuilt  in  1914  it  was 
more  valuable  than  a  new  car  built  in  1913.  Hence  we  do  not 
consider  that  the  erroneous  statement  in  the  application  that 
the  car  was  built  in  1913  was  under  the  circumstances  very 
material,  and  certainly  it  was  not  sufficiently  material  under 
our  statute  to  warrant  the  court  in  holding  as  a  matter  of 
law  that  it  deceived  the  insurer  to  its  injury.  For  this  rea- 


60 

son,  we  believe  that  the  order  directing  a  verdict  for  defend- 
ant was  erroneous." 

§  60.  Identification  of  Automobile. — In  an  action  on  a  fire 
policy,  where  the  automobile  burned  was  identified  as  that  de- 
scribed in  the  policy,  as  the  only  automobile  owned  by  the  in- 
sured, and  as  the  one  intended  to  be  covered  by  the  policy,  it 
was  held  to  be  no  defense  that  the  license  number  was  in- 
correctly stated  in  the  application.  And  where  the  descrip- 
tion of  a  burned  car  by  number  was  ambiguous,  it  being  shown 
to  have  a  serial  number  given  it  at  the  factory  and  that  of  the 
license  plate,  and  no  indication  being  made  as  to  which  was  in- 
tended in  the  application  or  policy,  extrinsic  evidence  was 
held  rightly  resorted  to,  to  show  what  was  intended.  White 
v.  Home  Mut.  Ins.  Assn.  of  Iowa  (1920)— Iowa— ,  179  N.  W. 
315. 

§  61.  Renting  and  Hiring  Warranties. — The  renting  and 
hiring  warranty  in  an  automobile  insurance  policy  is  usually, 
by  its  terms,  a  promissory  warranty,  a  breach  of  which  will 
avoid  the  policy.  An  automobile  fire  policy  contained  as  one 
of  its  terms  the  following: 

"17.  Warranted  by  the  assured  hereunder  that  the  auto- 
mobile hereby  insured  shall  not  be  used  for  carrying 
passengers  for  compensation  or  rented  or  leased  during 
the  term  of  this  policy;  and  in  the  event  of  violation  of 
this  warranty  this  policy  shall  immediately  become  null 
and  void." 

Having  been  inserted  in  the  body  of  the  policy,  this  war- 
ranty was  not  dependent  upon  the  negotiations  embodied  in 
the  application  and  final  issuance  of  the  contract  of  insur- 
ance, which  were  said  by  the  plaintiff  to  include  a  statement 
by  him  to  the  insurance  company's  agent  that  the  car  would 
be  rented  a  little  for  hire  in  the  summer,  on  which  the  agent 
assured  the  plaintiff  that  that  would  make  no  difference  to 
the  insurance  company;  and  the  Massachusetts  statute  of 
1907,  c.  576,  §  21,  as  to  intent  to  deceive  and  increase  risk 
of  loss  was  held  to  be  inapplicable.  If  the  automobile  was  used 


REPRESENTATIONS  AND  WARRANTIES  61 

for  the  transportation  of  passengers  for  hire  the  plaintiff 
stipulated  that  the  policy  should  be  void,  and  the  only  remain- 
ing question  was,  whether  upon  the  evidence  it  could  be  ruled 
as  matter  of  law  that  the  warranty  had  been  broken.  It  was 
agreed  by  the  parties,  that  with  the  plaintiff's  knowledge  and 
consent  the  plaintiff's  son,  for  compensation  which  he  received 
and  retained,  made  trips  during  August  and  September  with 
the  automobile  for  the  accommodation  of  tourists  and  pas- 
sengers ;  and  this  use  having  been  permitted  by  the  plaintiff, 
there  was  a  violation  of  the  warranty  at  common  law,  and 
whether  -the  risk  had  been  increased  was  immaterial.  The 
policy  was  therefore  not  in  force  when,  in  March  following, 
the  automobile  was  damaged  by  fire.  Nor  was  the  insured 
entitled  to  a  return  of  any  part  of  the  premium.  The  policy 
attached  and  while  the  premium  covered  the  life  of  the  policy 
if  its  terms  were  complied  with  by  the  insured,  the  latter 
could  not  through  his  voluntary  breach  deprive  the  insurance 
company,  which  was  without  fault,  of  the  full  benefit  of  the 
contract.  Elder  v.  Federal  Insurance  Co.  (1913)  213  Mass. 
389,  100  N.  E.  655.  It  is  held  that  it  is  not  necessary  that 
there  should  be  a  provision  in  the  policy  that  a  breach  of  a 
promissory  warrant  as  to  renting  therein  ;  shall  avoid  'the 
policy.  So,  if  the  insured  warrants  that  he  will  not  use  the 
car  for  carrying  passengers  for  compensation,  this  warranty 
is  a  part  of  the  policy  and  a  breach  of  it  avoids  the  policy, 
even  if  there  is  therein  no  provision  to  that  effect.  The  fol- 
lowing provision  in  an  automobile  fire  policy:  "It  is  war- 
ranted by  the  insured  that  the  automobile  hereby  insured, 
during  the  term  of  this  policy,  shall  not  be  used  for  carrying 
passengers  for  compensation,  and  that  it  shall  not  be  rented 
or  leased,"  constitutes  a  promissory  warranty,  and  a  breach 
thereof  by  the  insured  prevents  recovery.  Whether  the  risk 
was  increased  is  immaterial.  Orient  Insurance  Co. .  v.  Van 
Zant-Bruce  Drug  Co.  (1915)  50  Okla.  558,  151  Pac.  323. 

A  different  result  may  be  reached  where  the  warranty  by 
its  terms  is  not  a  promissory  warranty.     Where  an  indemnity 


62  AUTOMOBILE  INSURANCE  LAW 

policy  over  an  automobile  truck  containing  a  general  war- 
ranty that  the  truck  was  to  be  used  for  "delivery,"  provided 
that:  "None  of  the  automobiles  herein  described  are  rented 
to  others  or  used  to  carry  passengers  for  a  consideration, 
actual  or  implied,  except  as  follows;"  and  in  the  blank  space 
following  was  inserted:  "No  exceptions,"  it  was  held  that 
this  provision  should  be  construed  as  a  warranty  merely  that 
the  truck  was  not  rented  at  the  time  the  policy  took  effect, 
and  did  not  preclude  the  insured  from  maintaining  an  action 
against  the  insurance  company  for  damages  paid  to  a  per- 
son in  settlement  for  injuries  by  the  truck  which,  after  being 
stored  with  a  garage  company,  was  sent  out  by  the  latter  in 
charge  of  a  chauffeur  hired  and  paid  by  the  garage  company 
to  deliver  for  another  company.  Mayor  Lane  &  Co.  v.  Com- 
mercial Casualty  Ins.  Co.  (1915)  169  N.  Y.  App.  Div.  772,  155 
N.  Y.  Supp.  75. 

Where  the  renting  provision  declares  that:  "In  the  event 
of  violation  of  this  condition  this  policy  shall  forthwith  cease 
and  terminate,"  and  the  car  is  destroyed  by  fire  after  the 
carrying  business  has  ceased,  the  insurance  company  will  not 
be  held  liable.  A  contract  provision  worded  as  above  cannot 
be  suspended  during  the  machine's  use  for  hire  and  re-in- 
stated when  the  machine  is  not  so  used.  The  court  said: 
"This  may  be  so  under  some  circumstances,  but  we  think  the 
language  here  too  positive  to  bear  such  construction.  If 
the  premium  of  the  policy  be  fixed  on  the  terms  of  the  con- 
tract, why  should  the  insured  be  permitted  to  suspend  and 
reinstate  the  contract  at  will?  If  plaintiff's  contention  be  al- 
lowed this  would  be  the  effect  upon  the  contract."  Kress  v. 
Insurance  Co.  of  State  of  Pennsylvania  (1915)  18  Luzerne 
(Pa.)  Legal  Register  278.  ! 

A  policy  was  held  void  for  breach  of  the  renting  warranty 
in  Hamilton  v.  Fireman's  Fund  Insurance  Co.  (1915,  Tex.  Civ. 
App.)  177  S.  W.  173. 

§62.  Same— Warranties  Apply  Both  to  Mortgagor  and 
Mortgagee. — The  condition  in  an  automobile  fire  policy  issued 


REPRESENTATIONS  AND  WARRANTIES          63 

to  the  mortgagee  and  mortgagor  of  the  car,  as  their  respec- 
tive interests  might  appear,  that  the  car  should  not  be  used 
for  renting  purposes  or  for  hire,  applies  both  to  the  mortgag- 
or and  the  mortgagee.  Where  a  fire  insurance  policy  over 
an  automobile  issued  to  the  plaintiff  and  one  who  bought  the 
car  from  the  plaintiff  and  gave  back  a  mortgage  for  part  of 
the  purchase  price  provides  that  the  automobile  shall  not  be 
used  for  renting  purposes  or  for  hire,  and  the  evidence  shows 
that  the  car  was  used  mainly,  if  not  entirely,  for  livery  pur- 
poses and  uses  by  such  mortgagor,  there  can  be  no  recovery 
under  the  policy.  Marmon  Chicago  Co.  v.  Heath  (1917)  205 
111.  App.  605. 

§  63.    Same — Occasional  Use  for  Hire  Held  No  Breach. 

An  automobile  fire  insurance  policy  contained  these  clauses : 
"It  is  warranted  by  the  insured  that  the  automobile  hereby 
insured  during  the  term  of  this  policy  shall  not  be  used  for 
carrying  passengers  for  compensation,  and  that  it  shall  not 
be  rented  or  leased."  "In  the  event  of  violation  of  any  war- 
ranty hereunder,  this  policy  shall  immediately  become  null 
and  void."  It  was  held  that  the  former  of  these  provisions 
should  be  construed  as  prohibiting  the  owner  from  using  the 
automobile  continuously  for  carrying  passengers  for  hire  as 
a  business,  and  that  it  was  not  breached  by  the  fact  that  the 
owner's  son  had  used  the  car  on  two  or  three  afternoons 
during  a  fair  without  the  owner's  knowledge  for  carrying 
passengers  for  hire  to  and  from  the  fair-grounds.  Commer- 
cial Union  Assurance  Co.  of  London  v.  Hill,  (Tex.  Civ.  App. 
1914)  167  S.  W.  1095. 

A  clause  in  a  fire  policy  provided:  "The  motor  car  hereby 
insured  will  not  be  rented  or  used  for  passenger  service  of 
any  kind  for  hire,  except  by  special  consent  of  this  company 
endorsed  hereon  in  writing."  The  car  was  kept  by  the  in- 
sured, a  garage  keeper,  for  his  own  use,  and  was  not  rented 
for  hire,  though  it  had  been  used  once  to  take  a  man  to  the 
railroad  station.  The  car  was  taken  from  the  garage  by  one 
of  the  insured's  employees,  and  used  to  carry  a  party  of 


64  AUTOMOBILE  INSURANCE  LAW 

hunters  for  hire.  On  the  return  journey  it  was  punctured  and 
left  on  the  road.  After  the  owner  resumed  possession  of  it, 
and  was  taking  it  back  to  the  garage,  it  was  burned.  The 
proof  of  loss  stated  it  had  been  used  for  the  owner's  private 
purposes  "and  some  for  hire." 

It  was  held  that  the  parties,  by  the  clause  quoted,  apparently 
contemplated,  not  a  single  act  of  renting  or  using  the  car  for 
hire,  a  mere  casual  or  isolated  instance,  and  that,  too,  with- 
out the  knowledge  or  consent  of  the  owner,  but  something 
of  a  more  permanent  nature.  The  carrying  of  the  man  to 
the  station,  if  forbidden,  was  too  remote  from  the  time  when 
the  car  was  burned. 

The  clause  was  somewhat  obscurely  worded  and  therefore 
the  court  gave  it  the  construction  which  favored  the  insured, 
as  it  involved  a  question  of  forfeiture.  The  words  "passeng- 
er service,"  when  considered  in  connection  with  the  preceding 
words,  "rented"  or  "used,"  imply  more  than  a  single  act  of 
renting  or  using,  and  refer  to  the  business  of  carrying  pas- 
sengers for  hire.  Being  susceptible  of  this  meaning,  which, 
under  the  familiar  rule  applicable  to  such  cases  where  the  lan- 
guage is  not  clear  and  definite,  the  court  was  authorized  to 
give  them,  it  held  the  clause  did  not  apply  to  the  case.  Crow- 
ell  v.  Maryland  Motor  Car  Insurance  Co.  (1915)  169  N.  Car. 
35,  85  S.  E.  37. 

§  64.     Same — Effect   of   Statute   Abolishing   Warranties. — 

A  Kansas  policy  contained  a  warranty  that  the  insured  would 
not  let  out  the  automobile  for  hire  without  written  permission 
from  the  insurance  company.  In  an  action  on  the  policy  when 
the  car  was  burned  it  appeared  that  on  one  or  two  occasions 
this  provision  was  violated ;  but  at  the  time  the  car  was  burned 
it  was  not  hired.  The  Kansas  statute  has  abolished  warran- 
ties and  turned  them  into  mere  representations  unless  the 
matter  warranted  is  material  to  the  risk.  It  was  held  that  the 
matter  warranted  was  not  material  to  the  risk  and  the  viola- 


REPRESENTATIONS  AND  WARRANTIES          65 

tion  of  the  warranty  did  not  violate  the  policy.  Berryman 
v.  Motor  Car  Trust  Co.  (1908)  199  Mo.  App.  503,  204  S.  W. 
738. 

§  65.     Same — Violation  for  Jury — Burden  of  Proof. — The 

question  of  violation  of  the  renting  provision  is  usually  one 
for  the  jury.  Whether  the  duty  of  establishing  the  defense 
that  the  renting  provision  of  the  policy  has  been  violated  rests 
ordinarily  upon  the  defendant  apparently  has  not  been  decid- 
ed ;  but  where  a  statement  written  by  the  company's  adjuster 
and  signed  by  the  insured  is  given  in  place  of  proof  of  loss 
containing  the  statement  that  the  policy  had  been  violated 
by  the  carrying  of  passengers,  and  the  insured  is  notified 
before  the  trial  by  the  affidavit  of  defense  that  he  had  not 
complied  with  this  term  of  the  policy,  this  necessarily  demands 
proof  of  such  compliance.  Dunn  v.  First  National  Fire  In- 
surance Co.  (1918)  14  Schuylkill  (Pa.)  Legal  Record  389.  In 
an  action  against  an  insurance  company  for  the  loss  of  an 
automobile  by  fire,  an  averment  in  the  affidavit  of  defense 
that  the  insured  had  carried  passengers  for  hire  contrary  to 
the  terms  of  the  policy  is  sufficient  on  that  point  without 
giving  the  names  of  the  passengers  and  the  dates  on  which 
they  were  carried;  the  defendant  not  being  required  in  the 
affidavit  of  defense  to  set  forth  the  manner  in  which  the 
facts  therein  will  be  proven,  or  the  evidence  by  which  they 
will  be  substantiated.  Shaw  v.  Liverpool  &  London  &  Globe 
Ins.  Co.  Ltd.  (1915)  16  Lackawanna  Jurist  288. 

§66.  Location  of  Automobile— "Private  Garage."— The 
location  of  the  automobile  is  essentially  material  to  the 
contract.  So,  where  an  automobile  insured  under  a  policy 
containing  a  private  garage  warranty  was,  without  the  com- 
pany's knowledge  or  consent,  removed  to  another  city  in 
another  state,  where  it  was  kept  five  or  six  months,  and 
then  placed  in  a  repair  shop  where  it  was  burned,  the  re- 
moval was  held  permanent  and  the  policy  void.  Lummus 
v.  Fireman's  Fund  Insurance  Co.  (1914)  167  N.  Car.  654,  83 
S.  E.  688.  The  court  said.  "Nothing  is  better  settled  than 


66 

that  the  location  of  the  property  insured  is  essentially  ma- 
terial in  contracts  of  insurance  and  enters  largely  into  the 
consideration  of  the  company  in  fixing  the  rate  of  premium. 
The  clause  of  the  policy  in  this  case,  containing  this  war- 
ranty, expressly  declares  that  a  reduced  rate  of  premium 
is  granted  because  of  the  insertion  of  this  provision  in  the 
contract.  The  contention  of  the  plaintiff  that  the  policy 
could  remain  dormant  for  six  months  and  then  be  revived 
suddenly  because  the  property  was  burned  up  in  a  repair 
shop  is  utterly  untenable." 

A  fire  insurance  policy  described  the  car  insured  as  "usually 
kept  in  a  private  garage  on  lot. — "  It  was,  in  fact,  kept  in  a 
lean-to  to  the  insured's  barn,  in  which  it  was  burned.  It  was 
argued  that  this  was  not  a  garage.  The  court  said:  "The 
word  'garage'  was  recently  appropriated  from  the  French 
language,  there  meaning  keeping  under  cover,  or  a  place 
for  keeping,  and,  as  employed  in  English,  is  accurately  defined 
by  Webster's  Dictionary,  substantially  like  that  of  the  Cen- 
tury Dictionary,  as  'a  place  where  a  motor  vehicle  is  housed 
and  cared  for.'  To  be  such,  the  place  need  not  be  apart  from 
other  buildings,  though  that  may  be  the  more  common  and 
appropriate  way.  If  the  'place'  be  in  a  'lean-to'  attached  to 
another  building,  as  a  barn  or  corncrib  constructed  for  the 
purpose,  or,  having  been  erected,  is  set  apart  for  the  housing 
of  the  automobile,  it  is  none  the  less  a  'garage'  within  the 
meaning  of  that  word  in  either  language.  In  French  the 
word  has  reference  to  the  place  of  keeping  wagons  and 
other  vehicles  of  transportation,  as  well  as  automobiles ; 
but  in  English  it  appears  to  have  been  restricted  to  motor 
vehicles. 

"The  automobile  in  question  was  kept  in  the  front  end 
of  a  lean-to  16  feet  wide  and  26  feet  long,  attached  to  plain- 
tiff's barn.  By  its  side  was  kept  a  buggy,  and  fence'  or 
partition  back  of  it,  to  separate  the  vehicle  from  the  stock. 
As  to  the  automobile,  this  was  a  'private  garage,'  within  the 
meaning  of  that  expression  found  in  the  application."  White 


REPRESENTATIONS  AND  WARRANTIES  67 

v.   Home    Mut.    Ins.   Assn.   of   Iowa    (1920) — Iowa — 179   N. 
W.  315. 

§67.  Waiver  of  Location  Warranty. — A  company  which 
accepts  the  premium  and  issues  the  policy  with  knowledge 
of  the  place  where  the  automobile  is  actually  kept  must  be 
deemed  to  have  waived  any  mis-statement  with  reference 
to  its  locality.  White  v.  Home  Mut.  Ins.  Assn.  of  Iowa 
(1920)— Iowa— 179  N.  W.  315. 

An  automobile  fire  insurance  policy  contained  the  following 
clauses :  "Private  Garage  Warranty.  In  consideration  of 
the  reduced  rate  at  which  this  policy  is  written  it  is  under- 
stood that  the  property  insured  hereunder  shall  at  all  times 
be  kept  or  stored  in  the  private  garage  or  private  stable 
situated  at  1000  So.  Harwood  ^treet,  Dallas,  Texas.  Priv- 
ilege, however,  to  operate  car  and  to  house  in  any  other 
building  or  buildings  for  a  period  of  not  exceeding  fifteen 
days  at  any  one  location,  at  any  one  time,  provided  the  car 
is  en  route,  visiting  or  being  cleaned  or  repaired,  all  other 
terms  and  conditions  of  the  policy  remaining  unchanged." 
It  was  held,  in  an  action  on  the  policy,  that  evidence  that 
the  insurance  company's  general  '  agent  was  informed 
by  the  insured  as  to  certain  visits  to  other  places,  and  was 
told  that  the  company  had  no  objection  and  that  no  written 
waiver  was  necessary,  was  sufficient  to  show  a  waiver  of 
the  warranty,  the  general  agent  being  impliedly  authorized 
to  make  waivers.  Commercial  Union  Assurance  Co.  of 
London  v.  Hill,  (Tex.  Civ.  App.  1914)  167  S.  W.  1095. 

§68.  Other  Insurance. — A  provision  in  an  automobile  fire 
policy  that  "it  shall  be  null  and  void  if  at  the  time  a  loss 
occurs  there  be  any  other  insurance  covering  the  risks  as- 
sured by  this  policy"  will  prevent  recovery  where  the  auto- 
mobile was  insured  in  another  company  against  fire  and 
theft  under  a  policy  containing  a  covenant  against  other 
insurance  on  the  same  risks  without  the  consent  of  the 
insurer,  where  the  second  policy  is  not  declared  void  for 


68  AUTOMOBILE  INSURANCE  LAW 

breach  of  the  covenant.    Dimmick  v.  Aetna  Insurance  Co. 

(1919)  213  111.  App.  467.    In  an  action  on  a  policy  to  recover 
for  the  loss  of  an  automobile  which  was  stolen  and  burned, 
a  defense  was  that  the  plantiff  had  not  disclosed  other  in- 
surance over  the  car  when  he  applied  to  the  defendant  com- 
pany for  a  policy.    The  first  policy,  with  another  company, 
was  one  for  fire  only.    The  policy  in  this  case  was  for  fire, 
collision  and  theft,  although  it  was  held  that  the  evidence 
supported  the  insured's  theory  that  she  did  not  apply  to  the 
defendant  company  for  fire  insurance  on  her  car,  but  applied 
for  theft  insurance.    It  was  held  that  the  fact,  if  it  were  a 
fact,  that  the  company's  agent  may  have  filled  in  the  ap- 
plication signed  by  the  plaintiff  so  as  to  request  insurance 
for  fire,  theft,  etc.,  unless  the  plaintiff's  attention  was  called 
thereto  when  she  signed  the  application,  would  not  of  itself 
bar  the  plaintiff  from  recovering  for  damages  sustained  by 
reason  of  the  theft  of  her  automobile,  even  although  prior 
to  that  time  she  had  taken  fire  insurance  in  another  company. 
Dimmick   v.    Illinois   Automobile    Fire    Insurance   Exchange 

(1920)  216  111.  App.  543. 

Proof  of  the  existence  of  other  insurance  avoiding  the 
first  policy  is  sufficiently  established  by  the  plaintiff  himself 
introducing  in  evidence  the  second  policy  expressly  covering 
the  same  risk,  and  proof  thereof  by  the  defendant  insurance 
company  is  then  unnecessary.  Dimmick  v.  Aetna  Insurance 
Co.,  213  111.  App.  467,  (1919). 

§69.    Other     Insurance     Does     Not     Necessarily     Forfeit 

Policy. — A  clause  that  the  policy  will  become  void  if  other 
insurance  has  been  taken  which  covers  the  property  at  the 
time  of  the  loss  does  not  necessarily  forfeit  the  policy  by 
the  taking  of  other  insurance,  and  is  no  ground  for  an  action 
for  unearned  premiums  where  no  notice  of  such  additional 
insurance  has  been  given  to  the  company  and  no  loss  oc- 
curred to  the  property.  An  insured  sued  for  a  return  of 
unearned  premium  from  a  certain  date  for  the  reason  that 


REPRESENTATIONS  AND  WARRANTIES          69 

the  policy  had  become  void  on  that  date,  when  he  took  out  a 
policy  in  another  company  covering  the  loss,  this  policy  pro- 
viding: 'If  at  the  time  a  loss  occurs  there  be  any  other  in- 
surance, direct  or  indirect,  covering  the  property  described 
therein  which  would  attach  if  this  insurance  had  not  been 
effective,  and  if  such  other  insurance  has  been  effected  with- 
out the  special  consent  of  this  company  endorsed  hereon,  then, 
in  that  event,  this  insurance  shall  be  null  and  void." 

As  by  the  very  terms  of  this  covenant  the  policy  was  only 
to  become  void  in  case  of  other  insurance  at  the  time  a  loss 
occurred,  and  no  loss  having  occurred,  the  policy  never  be- 
came void.  The  insured  might  have  cancelled  the  policy  he 
had  taken  out  in  some  other  company  at  any  time  before  a 
loss  occurred  and  if  he  had  done  so  his  rights  under  the 
first  policy  would  not  have  been  affected  by  the  fact  that 
he  at  one  time  had  insurance  in  some  other  company.  Healy 
v.  Stuyvesant  Insurance  Co.  (1918)  72  Pa.  Superior  Court, 
168.  The  court  said:  "When  a  policy  expressly  stipulates 
that  the  taking  out  of  other  insurance  without  the  consent 
of  the  company  shall  render  the  policy  void,  the  insured 
is  not  entitled  to  a  return  of  his  premium  merely  because  he 
has  violated  the  covenants  of  his  policy.  The  object  of  the 
clause  is  to  give  the  company  an  opportunity  to  examine 
into  a  new  factor  which  may  alter  its  position  in  the  con- 
tract, and  to  regulate  its  action  accordingly.  This  oppor- 
tunity it  cannot  have  until  the  notice  is  received.  The  com- 
pany is  entitled  to  notice  of  such  material  change  in  the  rela- 
tion of  the  amount  insured  to  the  value  of  the  property,  and 
an  opportunity  to  accept  and  approve  the  contract  in  its 
new  condition,  or  to  terminate  and  cancel  the  insurance  in 
the  method  provided  in  the  policy." 

§70.  Misrepresentations  as  to  Ownership. — The  Spring- 
field Fire  and  Marine  Insurance  Company  issued  a  policy 
of  insurance  in  the  amount  of  $1,000  to  the  Chero  Cola 
Bottling  Company  on  May  22,  1915,  for  the  term  of  one 


70  AUTOMOBILE  INSURANCE  LAW 

\ 

year,  covering  an  automobile  truck,  which  the  insured,  in 
an  action  on  the  policy,  alleged  was  totally  destroyed  by 
fire  on  April  24,  1916,  entailing  a  loss  of  the  full  value 
thereof,  amounting  to  $1,300.  In  the  defense  filed  by  the 
insurance  company  it  was  alleged  that  the  policy  was,  ac- 
cording to  its  own  terms  and  provisions,  violated  and  ren- 
dered inoperative  by  reason  of  the  fact  that  the  interest  of 
the  insured  was  not  truly  stated  therein,  and  that  the  "in- 
terest of  the  insured  was  other  than  unconditional  and  sole 
ownership,"  as  required  by  the  policy,  in  that  prior  to  the 
date  of  its  issuance  the  title  to  the  property  covered  by  the 
contract  had  been  conveyed  under  a  bill  of  sale  executed 
by  thd  insured  to  the  Washington  Exchange  Bank.  A 
further  condition  of  the  policy  was  pleaded,  in  which  it  was 
provided  that  "this  entire  policy  shall  be  void  in  case  of 
fraud  or  false  swearing  by  the  insured  touching  any  matter 
relating  to  the  insurance  or  the  subject  matter  thereof, 
whether  before  or  after  loss,"  the  defendant  averring  that 
the  plaintiff,  in  its  proofs  of  loss,  was  guilty  of  violating 
these  terms  of  the  contract  by  its  misrepresentaion  and  con- 
cealment of  the  facts  as  to  the  property  being  in  any  way 
incumbered.  The  plaintiff  sought  to  meet  these  defenses 
thus  set  up  by  showing  that  the  bill  of  sale  referred  to  as 
executed  by  it  to  the  Washington  Exchange  Bank,  though 
absolute  on  its  face,  was,  in  fact,  a  sale  to  secure  a  debt,  and 
that  since  usury  was  included  in  that  transaction  the  instru- 
ment was  void,  and  consequently  there  had  been  no  change 
of  title.  The  verdict  was  for  the  plaintiff  in  the  sum  of 
$600.  The  defendant  excepted  to  the  refusal  of  its  motion 
for  a  new  trial.  It  was  held  that  the  conveyance  of  title 
above  referred  to  being  a  valid 'one,  the  policy,  according  to 
its  terms,  was  thereby  rendered  inoperative  and  void.  Though 
the  note  to  the  bank  bore  date  as  of  March  8th,  the  transac- 
tion must,  under  the  evidence,  be  treated  as  having  been  in 
fact  closed  on  March  5th,  which  was  in  fact  the  date  shown 
by  the  bill  of  sale,  and  therefore  the  discount  included  in 


REPRESENTATIONS  AND  WARRANTIES  71 

the  note  was  not  usurious.  Springfield  Fire  and  Marine 
Insurance  Co.  v.  Chero  Cola  Bottling  Co  (1918) — Ga.  App. — 
96  S.  E.  332. 

§71.  Change  of  Ownership.  Where  an  insured  automobile 
dealer,  without  the  knowledge  or  consent  of  the  insurance 
company  directly  or  through  any  agency,  parted  with  the 
possession  of  the  automobile,  delivering  it  to  another  under 
a  contract  for  its  purchase  by  the  latter,  who  drove  it  into 
another  state,  where  it  was  destroyed  by  fire,  this  constituted 
a  breach  of  the  required  provisions  mentioned  in  the  Oregon 
standard  policy  law,  making  the  "entire  policy  void  unless 
otherwise  provided  by  agreement  indorsed  hereon  or  added 
hereto  *  *  *  if  any  change,  other  than  by  death  of 
an  insured,  takes  place  in  the  interest,  title,  or  possession 
of  the  subject  of  insurance,"  and  the  insurance  company 
was  held  not  liable  under  its  covering  notes  for  the  loss. 
Under  the  presumption  of  section  799,  subdivision  34,  L.  O. 
L.,  "that  the  law  has  been  obeyed,"  where  an  insurance 
company's  covering  note  provided  that  the  insurance  was 
subject  to  all  the  terms  and  conditions  of  the  automobile 
floater  policy  in  use  by  the  company  covering  fire,  theft, 
and  transportation,  it  must  be  presumed  that  the  policy  con- 
tained the  provisions  enjoined  by  the  Oregon  standard  policy 
law  (Laws  1911,  p.  279),  such  as  a  provision  as  to  forfeiture 
on  change  of  the  insured's  interest,  title,  or  possession. 
Cranston  v.  California  Insurance  Co.  (1919)  94  Or.  369,  185 
Pac.  292. 

Where  a  policy  holder  makes  a  positive  statement  under 
oath  that  he  was  the  owner  of  the  automobile  at  the  time 
of  its  destruction,  the  insurance  company  is  not  bound  to 
make  further  inquiry,  and  may  recover  the  amount,  with 
interest,  collected  by  means  of  such  statement,  if  it  is  un- 
true. It  is  immaterial  that  the  policy  holder  believed  the 
statement  made  by  him  to  be  true.  The  seller  of  an  auto- 
mobile reserved  title  to  secure  the  unpaid  purchase  price, 


72  AUTOMOBILE  INSURANCE  LAW 

and  also,  for  further  security,  retained  a  fire  policy  over  the 
machine,  which  provided  that  a  change  in  title  should  in- 
validate the  policy.  The  buyer  thereafter  mortgaged  land 
to  the  seller  receiving  a  few  hundred  dollars  in  money  and 
the  seller  returning  his  note  for  the  price  of  the  automobile, 
which  note  was  destroyed.  It  was  held  that  in  view  of  tht 
Texas  statute,,  Rev.  St.  art.  5654,  declaring  that  all  reserva- 
tions of  title  to  chattels  to  secure  the  purchase  money  shall 
be  held  chattel  mortgages,  there  was  an  absolute  sale  with 
reservation  of  a  chattel  mortgage,  so  that  the  policy  was 
avoided,  the  policy  declaring  that  a  change  in  the  title  would 
invalidate  it.  Hamilton  v.  Fireman's  Fund  Insurance  Co., 
(Tex.  Civ.  App.,  1915),  177  S.  W.  173. 

§72  Waiver  of  Conditions  as  to  Ownership. — If,  at  the 
time  of  issuing  a  policy,  an  insurance  company  is  informed 
that  the  insured  is  not  the  unconditional  owner,  or  if  after 
it  receives  such  knowledge,  and  thereafter  fails  to  rescind 
for  an  unreasonable  time  and  retains  the  premium,  it  thereby 
waives  the  condition.  If,  upon  the  receipt  of  the  proof  oT 
loss  the  insurance  company  rejects  the  claim  upon  the  sole 
ground  that  the  insured  was  not  the  sole  and  unconditional 
owner  of  the  automobile,  it  is  held  all  other  defenses  are 
thereby  waived.  Where  the  insurance  company  knew  of 
the  character  of  the  insured's  title  when  the  policy  was  is- 
sued, and  again  when  proof  of  loss  was  made,  and  delayed 
to  tender  back  the  premium  until  two  months  after  suit 
was  commenced  on  the  policy,  the  defense  that  the  insured 
was  not  the  sole  and  unconditional  owner  as  conditioned  by 
the  policy  was  waived.  Vulcan  Insurance  Co.  v.  Johnson 
(1920)— Ind.  App.— 128  N.  E.  664. 

Though  an  automobile  fire  policy  provides  that  a  change 
of  ownership  of  the  car,  without  the  written  consent  of  the 
insurance  company,  renders  the  policy  void,  and  that  agents 
of  the  company  cannot  waive  any  provisions  of  the  policy 
unless  such  waiver  is  written  upon  the  policy  or  attached 


REPRESENTATIONS   AND  WARRANTIES  73 

thereto,  yet  where  the  local  agent  of  the  company  knew,  be- 
fore he  issued  the  policy  to  A,  that  the  automobile  had  been 
sold  by  A  to  B,  it  was  held  that  the  company  was  bound  By 
such  knowledge,  and  was  estopped  from  setting  up,  as  a. 
defense  to  a  suit  upon  the  policy,  the  non-compliance  of  the 
plaintiff  with  these  provisions  of  the  policy.  Commercial 
Union  Assurance  Co.  v.  Lyon  &  Kelly  (1915)  17  Ga.  App. 
441,  87  S.  E.  761. 

§72a.  Incumbrances. — A  provision  in  an  automobile  in- 
surance policy  that  if  the  property  insured  "be  or  become 
incumbered  by  a  chattel  mortgage,"  the  policy  shall  be 
void,  is  valid;  and  if  the  insured  so  incumbers  the  automo- 
bile, the  insurer  has  the  right  to  insist  that  its  liability  under 
the  policy  became  thereby  terminated.  The  purchaser  of 
an  automobile  by  absolute  sale  who,  to  enable  the  seller 
to  discount  the  purchase  money  note,  subsequently  executes 
an  instrument  in  form  a  contract  of  conditional  sale,  which 
is  recorded  in  the  manner  prescribed  for  chattel  mortgages, 
thereby  incumbers  the  automobile  within  the  meaning  of 
such  a  policy.  Springfield  Fire  and  Marine  Insurance  Co. 
v.  Chandlee  (1913)  41  App.  D.  C.  209. 

In  Cottingham  v.  Maryland  Motor  Car  ^Insurance  Co., 
(1915)  168  N.  Car.  259,  84  S.  E.  274,  it  is  held  that  where  an 
unincumbered  automobile  is  insured  under  a  standard  fire 
policy  and  the  insured  thereafter  gives  a  mortgage  thereon 
which  is  canceled  before  the  destruction  of  the  car  by  fire, 
the  cancellation  of  the  mortgage  revives  the  original  status 
of  the  policy  and  puts  it  again  in  force.  To  the  same  effect 
Gould  v.  St.  Paul  Fire  &  Marine  Insurance  Co.  (1919) — Wash. 
—177  Pac.  787. 


CHAPTER  IX. 

Subrogation. 

§  73.  Subrogation  of  Company  to  Owner's  Rights  on  Payment  of 
Claim. 

§  74.  Same. 

§  75.  Same. 

§  76.  Assignment  of  Claims  Under  Policies. 

§73.  Subrogation  of  Company  to  Owner's  Rights  on  Pay- 
ment of  Claim. — An  insurance  company  which  has  paid  for 
damages  to  an  insured  automobile  injured  by  the  negligence 
of  a  third  party  is  subrogated  to  all  the  rights  of  the  owner 
of  the  automobile.  Allen  v.  Arnink  Auto  Renting  Co.  v. 
United  Traction  Co.  (1915)  91  Misc.  (N.  Y.)  531,  154  N.  Y. 
Supp.  934.  See  also  American  Automobile  Ins.  Co.  v.  United 
Rys.  Co.,  (1918),  200  Mo.  App.  317,  206  S.  W.  257. 

When  an  insurance  company  has  paid  the  insured  for  the 
loss  which  he  has  sustained  by  the  theft  of  his  car  while  it 
was  in,  the  custody  of  a  repairer,  the  insurance  company 
is  subrogated  to  the  rights  of  the  insured  and  is  entitled  to 
maintain  an  action  against  the  repairer  in  the^  name  of 
the  insured  if  the  jury  are  satisfied  that  the  car  was  left  in 
the  repairer's  custody,  and  was  stolen  and  damaged  by  reason 
of  his  negligence.  Stevens  v.  Stewart- Warner  Speedometer 
Corp.  (1916)  223  Mass.  44,  111  N.  E.  771. 

An  insurer  which  has  paid  the  loss  under  a  theft  policy, 
and  taken  an  assignment  from  the  insured  of  all  his  right, 
title  and  interest  in  the  automobile,  may  maintain  a  suit  to 
replevin  the  car  against  one  claiming  to  be  an  innocent  pur- 
chaser thereof.  Globe  &  Rutgers  Fire  Insurance  Co.  of  New 
York  v.  Adams,  (1921),— Mo.  App.—,  230  S.  W.  345. 

An  insurance  company  insured  an  automobile  under  a 
policy  providing  for  subrogation.  The  machine  was  struck 

74 


SUBROGATION  75 

and  injured  by  a  street  car,  the  owner  being  personally  in- 
jured at  the  same  time.  The  insurance  company  discharged 
its  liability  under  the  policy  and  received  an  assignment  from 
the  owner  of  his  rights  for  injury  to  the  car.  The  owner 
afterwards  recovered  judgment  against  the  street  car  com- 
pany for  his  personal  injuries.  This  judgment  did  not  pre- 
clude a  subsequent  action  by  the  insurance  company  under  its 
assignment,  as  owing  to  the  provisions  of  the  policy  providing 
for  subrogation  two  causes  of  action  arose  out  of  the  ac- 
cident, and  there  was  .no  splitting  of  causes  of  action  which 
would  render  a  recovery  on  one  a  bar  to  the  other.  Under- 
writers at  Lloyds  Insurance  Co.  v.  Vicksburg  Traction  Co. 
(1913)  106  Miss.  244,  63  So.  425.  In  its  opinon  in  the 
insurance  company's  action  against  the  street  car  company, 
reversing  judgment  for  the  defendant,  the  court  said: 
"Appellant  had  an  equitable  interest  in  the  automobile  at 
the  time  of  the  collision  by  reason  of  having  written  the  policy 
of  insurance.  When  it  was  damaged,  then,  by  virtue  of  the 
contract  of  insurance  and  the  article  of  subrogation,  appel- 
lant had  such  an  interest  in  the  claim  for  damages.  This 
interest  became  a  right  to  sue  at  law  when  appellant  paid  to 
Mr.  O'Neil  (the  insured)  the  amount  owning  him  for  loss  un- 
der the  policy  and  received  from  him  assignment  of  his  claim 
and  was  subrogated  to  his  right  to  recover  for  damages. 
Therefore,  when  the  suit  was  filed  by  Mr.  O'Neil  on  Decem- 
ber 16,  1909,  against  appellee,  the  cause  of  action  for  re- 
covery for  injuries  sustained  to  his  person  was  in  Mr.  O'Neil, 
and  the  cause  of  action  to  recover  for  damages  to  the  auto- 
mobile was  in  appellant.  There  were  then  two  distinct 
causes  of  action,  two  separate  rights  to  recover,  in  two 
different  persons." 

§74.  Same. — An  owner  insured  against  loss  by  fire  and 
damage  by  collision,  who  settled  with  the  wrongdoer  for 
damages  to  the  automobile  in  a  collision,  giving  a  full  and 
complete  release,  could  not  recover  on  the  policy,  which  con- 


76  AUTOMOBILE  INSURANCE  LAW 

tained  a  subrogation  clause  in  the  following  terms:  "If  this 
company  shall  claim  that  the  damage  was  caused  by  the  act 
or  neglect  of  any  person  or  corporation,  private  or  municipal, 
this  company  shall,  on  payment  of  the  loss,  be  subrogated 
to  the  extent  of  such  payment  to  all  right  of  recovery  by  the 
insured  for  the  loss  resulting  therefrom,  and  such  right  shall 
be  assigned  to  this  company  by  the  insured  on  receiving 
payment."  It  appeared  that  shortly  after  the  injury  the  in* 
sured  offered  to  make  an  assignment  of  his  right  to  an  at- 
torney for  the  insurance  company,  who  refused  to  take  it  at 
the  time  for  want  of  full  authority  to  act  for  the  company, 
and  because  reasonable  time  had  not  elapsed  to  make  in- 
vestigation of  the  injury.  Immediately  afterwards  the  in- 
sured filed  the  claim  with  the  wrongdoer  and  settled.  It 
was  held  that  the  insurance  company  had  not  waived  its 
right  to  subrogation  under  the  policy.  Maryland  Motor  Car 
Ins.  Co.  v.  Haggard  (1914)  Tex.  Civ.  App.,  168  S.  W.  1011. 
The  time  when  the  payment  was  to  be  made  by  the  com- 
pany was  not  specified  in  the  policy;  but  a  reasonable  time 
would  by  law  be  given  the  company  to  make  the  payment 
of  loss  and  call  upon  the  insured  to  make  the  assignment 
of  his  cause  of  action  against  the  wrongdoer.  And  it  would 
become  the  duty  of  the  insured,  in  order  to  perform  his  part 
of  the  agreement,  to  continue  in  a  position  to  make  it  legally 
possible  for  him  to  make  a  legally  effective  assignment  when 
called  upon  to  do  so  within  a  reasonable  time  by  the  company. 

A  company  which  has  insured  a  car  against  theft  by  a 
policy  in  force  at  the  time  of  the  theft  of  the  car,  which, 
when  the  theft  was  reported,  paid  the  policy  and  took  an 
assignment  of  all  the  interest  of  the  owners  of  the  car  in 
the  policy  and  a  bill  of  sale  to  the  car,  may  appear  as  claimant 
on  sequestration  of  the  automobile.  Dawedoff  v.  Hooper 
(Tex.  Civ.  App.  1916)  190  S.  W.  522. 

An  indemnity  company  insuring  a  bus  line,  which  paid  a 
judgment  obtained  by  an  injured  person  against  the  bus 
line,  on  which  he  was  a  passenger,  and  the  driver  of  another 


SUBROGATION  77 

automobile,  in  an  action  in  which  both  were  found  negligent 
and  were  held  liable  for  this  concurrent  negligence,  was 
held  not  entitled  to  be  subrogated  to  the  rights  of  the  in- 
sured bus  line  against  the  other  defendant.  Adams  v.  White 
Bus  Line  (1921),— Cal.195  Pac.  389. 

Where  an  insurance  company  had  paid  an  owner  in  full  a 
claim  for  injuries  to  an  insured  automobile  in  a  collision 
with  a  street  car,  it  brought  an  action  in  its  own  name  against 
the  street  car  company,  it  being  the  only  party  who  had 
suffered  any  loss.  As  to  whether  or  not,  under  the  Alabama 
Code,  the  cause  of  action  could  have  been  prosecuted  under 
these  circumstances  by  the  insurance  company  in  its  own 
name  was  mooted,  but  not  decided.  It  was  held  that,  as  a 
matter  of  course,  the  company  had  the  right  to  amend  its 
complaint  by  adding  as  the  nominal  plaintiff  the  name  of 
the  owner  of  the  car,  and  proceed  with  the  cause  as  thus 
amended  in  the  name  of  the  owner  for  the  use  of  the  com- 
pany. Birmingham  Railway,  Light  &  Power  Co.  v.  Aetna 
Accident  &  Liability  Co.  (1913)  184  Ala.  601,  64  So.  44. 

The  owner  of  an  automobile  having  a  policy  of  insurance 
over  it  instructed  a  garage  company  to  send  for  it  to  be 
stored  at  the  garage.  While  the  garage  company's  employee 
was  taking  it  to  the  garage  a  collision  occurred,  damaging 
the  car.  The  owner  paid  the  garage  company  under  protest 
for  repairs  and  new  parts  necessitated  by  the  collision,  the 
money  being  furnished  by  the  insurance  company,  and  sued 
the  garage  company  therefor  for  the  use  of  the  insurance 
company.  It  was  held  that  the  plaintiff  was  not  required  to 
prove  the  interest  of  the  insurance  company,  as  with  that  the 
garage  company  had  no  concern.  The  only  effect  of  bringing 
the  action  for  the  use  of  the  insurance  company  was  to  de- 
clare a  use  for  that  company.  The  action  in  this  form 
operated  merely  as  an  estoppel  on  the  plaintiff  insured  to 
deny,  as  against  the  company,  the  latter's  right  to  the  pro- 
ceeds. Southern  Garage  Co.  v.  Brown  (1914)  187  Ala.  484, 
65  So.  400. 


78  AUTOMOBILE  INSURANCE  LAW 

§75.  Same. — In  an  action  by  a  car  owner  to  recover 
damages  in  the  sum  of  $500  as  a  result  of  a  collision  of  his 
car  with  a  team  of  the  defendant  company,  the  defendant 
introduced,  over  the  plaintiff's  objection,  a  release  executed 
by  the  plaintiff  to  the  Aetna  Accident  &  Liability  Company, 
releasing  and  discharging  that  company  from  all  liability  un- 
der the  policy  of  insurance  on  the  car,  for  the  damages  which 
occurred  on  this  occasion.  This  release  was  in  consideration 
of  the  sum  of  $200,  and  further  stipulated  that  the  insurance 
company  was  subrogated  to  the  amount  of  such  payment  to 
the  right  of  recovery  of  the  plaintiff  for  such  loss  or  expense 
against  the  persons  who  caused  or  contributed  to  it.  The 
rights  of  subrogation,  therefore,  as  set  forth  in  the  release, 
were  limited  to  the  amount  of  the  payment  of  $200.  It  was 
held  that,  in  a  case  of  this  kind,  where  the  owner  has  been 
reimbursed  by  the  insurance  company  only  partially  for 
the  loss  suffered,  and  the  latter  thereby  subrogated  to  the 
rights  of  the  owner  only  to  the  extent  of  the  payment  of  such 
partial  loss,  the  right  of  action  is  in  the  owner,  and  he  may 
maintain  the  suit  in  his  own  name.  The  question  of  the 
distribution  of  the  proceeds  of  recovery  in  such  cases  is  a 
matter  concerning  only  the  owner  and  the  insurance  com- 
pany, and  with  which  the  wrongdoer  is  not  concerned.  The 
release  therefore  was  held  inadmissible  for  the  purpose  of 
showing  that  the  plaintiff  had  entirely  parted  with  his  right 
of  action  and  that  he  could  not  therefore  maintain  the  suit. 
Wyker  v.  Texas  Co.  (1918)  201  Ala.  585,  79  So.  7.  The  court 
quoted  from  the  opinion  in  Southern  Ry.  Co.  v.  Blunt  & 
Ward,  165  Fed.  258,  where  the  question  was  discussed  in 
whose  name  the  cause  of  action  should  be  brought  in  cases 
of  this  character,  where  the  owner  was  reimbursed  by  the 
insurance  company  only  partially  for  the  loss  sustained,  as 
follows :  "If  from,  the  pleadings  it  appeared  that  the  Trans- 
portation Mutual  Insurance  Company  had  paid  to  the  plaintiff 
only  a  part  of  the  loss,  they  would  be  jointly  interested  in 
the  recovery  from  the  indemnitors,  Blunt  &  Ward,  and  the 


SUBROGATION  79 

plaintiff  could  maintain  the  action  in  its  own  name  and  re- 
cover the  full  amount  of  the  loss.  As  to  the  amount  paid  by 
the  insurance  company,  it  would  become  a  trustee  for  said 
company.  If  the  insurance  company  had  paid  the  plaintiff 
all  of  the  loss,  then  this  suit  should  be  by  the  insurance 
company  alone  in  the  name  of  the  railway  company  as  the 
nominal  plaintiff  for  the  use  of  the  insurance  company.  If 
only  a  part  of;  the  loss  had  been  paid  by  the  insurer,  the 
insured  would  be  entitled  to  the  residue ;  and  how  the  money 
recovered  is  to  be  divided  between  them  is  a  matter  which 
interests  them  alone,  and  in  which  the  defendants  are  not 
concerned,"  Southern  Ry.  Co.  v.  Blunt  &  Ward  (1908)  16i5 
Fed.  258,  quoted  in  Wyker  v.  Texas  Co.  (1918)  201  Ala.  585, 
79  So.  7.  See  also  Webb  v.  Southern  Ry  Co.  (1916)  235  Fed. 
578. 

§76.  Assignment  of  Claims  Under  Policies. — An  action 
was  brought  in  the  New  Jersey  courts  upon  eight  or  nine 
different  insurance  policies,  a  copy  of  one  of  which  was 
annexed  and  the  others  were  said  to  be  of  like  tenor  and 
effect  and  to  contain  the  same  covenants,  limitations  and 
restrictions.  The  policies  were  on  automobiles  and  the 
statement  of  claim  showed  the  number  of  the  policy  and 
the  amount  insured  in  it  and  the  loss  upon  it,  but  gave  no 
other  particulars  either  as  to  the  name  of  the  insured,  'the 
kind  of  machine  insured  or  the  nature  of  the  loss.  The  plain- 
tiff's claim  was  founded  upon  an  endorsement  upon  the 
policy  that  the  loss,  if  any,  was  first  payable  to  the  Colonial 
Trust  Company  and  the  Automobile  Securities  Company, 
the  plaintiff,  as  their  respective  interests  might  appear.  It 
was  not  alleged  that  the  plaintiff  was  the  owner  of  any  of 
the  automobiles,  nor  was  there  any  statement  as  to  what 
interest  it  had,  if  any,  in  any  of  them ;  nor  did  the  statement 
allege  anything  as  to  the  fulfillment  by  the  insured  of  the 
terms  of  the  policy  in  the  event  of  loss,  as  to  giving  notice 
and  proof,  nor  as  to  what  the  loss  consisted  of.  It  was  held 


80  AUTOMOBILE  INSURANCE  LAW 

that  this  did  not  sufficiently  show  a  cause  of  action,  and  an 
attachment  based  on  the  policies  was  dissolved.  Automobile 
Securities  Co.  v.  Atlas  Assurance  Co.,  Ltd.  (1919)  67  Pitts- 
burgh Legal  Journal,  303. 


CHAPTER  X. 

Actions  and  Defenses. 

§  77.    Voluntary   Settlements   and  Aids   in   Defense. 
§78.    Miscellaneous. 

§77.    Voluntary  Settlements   and   Aids  in  Defense.— The 

settlement  by  an  insurance  company  of  a  small  loss  for  which 
it  was  not  liable  with  an  insured  who  has  by  mistake  applied 
for  a  policy  other  than  that  which  he  wished  (an  indemnity 
instead  of  a  direct  collision  policy)  will  not  estop  the  com- 
pany from  denying  liability  for  a  subsequent  loss  not  covered 
by  the  policy.  Browne  v.  Commercial  Union  Assurance  Co. 
(1916)  30  Cal.  App.  547,  158  Pac.  765.  Action  was  brought 
on  a  policy  insuring  an  automobile  against  theft  and  other 
perils.  The  policy  was  issued  to  a  company,  the  Henley- 
Kemball  Company,  and  to  the  plaintiff's  intestate,  as  their 
interests  might  appear,  and  required  written  notice  of  loss 
or  damage  forthwith  to  the  company  or  the  authorized 
agent  who  issued  the  policy  and  a  signed  and  sworn  statement 
by  the  insured  within  60  days  thereafter,  unless  the  time 
was  extended  in  writing,  stating  the  time  and  cause  of  the 
loss.  The  car  was  stolen.  The  time  was  never  extended, 
and  the  insured,  without  having  rendered  a  statement,  died 
more  than  60  days  after  the  loss.  The  insurance  company, 
however,  nearly  six  months  thereafter,  paid  the  Henley- 
Kemball  Company,  which  had  also  failed  to  render  a  state- 
ment, the  amount  of  its  insurable  interest.  The  plaintiff 
now  claimed  that  this  payment  operated  as  a  waiver  of  any 
statement  by  his  intestate,  and  that  he  was  entitled  to  the 
amount  of  insurance,  with  interest.  The  car  was  in  the  pos- 

81 


82  AUTOMOBILE  INSURANCE  LAW 

session  of  the  intestate  under  a  conditional  sale  from  the 
Henley-Kemball  Company,  by  the  terms  of  which  a  certain 
part  of  the  purchase  price  had  been  paid  in  cash  while  the 
balance  was  payable  by  instalments.  It  was  further  provided 
that  the  conditional  vendor  should  effect  the  insurance  and 
pay  the  premium,  which  was  to  be  added  to  the  price,  and 
upon  the  final  payment  of  the  entire  indebtedness  a  bill  of 
sale  was  to  be  given.  It  was  contended  by  the  insurance  com- 
pany that  their  relation  was  analogous  to  that  of  mortgagor 
and  mortgagee  under  a  policy  made  payable  to  the  mort- 
gagee as  his  interest  may  appear,  and,  their  interests  being 
several,  the  contract  of  insurance  could  be  enforced  by  either 
to  the  extent  of  his  rights  in  the  property,  and  a  settlement 
with  one  would  not  bar  the  rights  of  the  other,  if  compliance 
with  the  condition  precedent  were  shown.  It  was  held,  how- 
ever, unnecessary  to  determine  the  nature  or  scope  of  the 
contract,  for  on  the  record  neither  party  had  any  enforceable 
rights.  The  payment,  therefore,  was  a  m)ere  gratuity, 
which  did  not  operate  as  a  relinquishment  by  the  insurance 
company  of  the  right  in  this  action  to  insist  upon  a  com- 
pliance with  the  terms  of  the  policy.  Navickis  v.  Fireman's 
Fund  Insurance  Co.  (1920)— Mass.— 126  N.  E.  388. 

An  automobile  indemnity  policy  contained  the  following 
clause :  "No  action  shall  lie  against  the  company  under  this 
policy  unless  it  shall  be  brought  by  the  assured  himself  to 
reimburse  him  for  loss  actually  sustained  and  paid  in  money 
by  him  after  trial  of  the  issue,  in  satisfaction  of  a  final  judg- 
ment, against  him,  nor  unless  such  action  is  brought  within 
ninety  days  after  such  judgment  has  been  paid  and  satisfied 
as  aforesaid."  While  the  automobile  was  being  used  by  a 
director  and  general  manager  of  the  insured  corporation  on 
his  own  business  it  injured  a  horse,  whose  owner  sued  the 
director,  Rosenfeld.  The  corporation  notified  the  insurance 
company  of  the  action  and  requested  the  latter  to  defend 
it,  which  it  failed  to  do.  The  insured  then  defended  the  suit, 
and  employed  counsel.  On  a  trial  there  was  a  verdict  and 


ACTIONS  AND  DEFENSES  83 

judgment  against  Rosenfeld.  The  insured  was  not  a  party 
to  the  action.  The  insured  paid  the  judgment  and  sued  tfie 
insurance  company  for  the  amounts  it  had  paid  out  on  the 
judgment  and  in  defending  the  suit. 

The  insurance  company  was  held  not  liable.  The  court 
said :  "It  cannot  be  maintained  that  a  stranger  who  vol- 
untarily employs  counsel  and  defends  a  suit  for  tort  com- 
mitted by  the  defendant  is  by  reason  of  this,  if  unsuccessful, 
bound  for  the  payment  of  the  judgment  against  the  defendant. 
When  the  Indemnity  Company  insured  the  Distilling  Com- 
pany and  not  Rosenfeld,  the  Distilling  Company  could  not, 
by  its  voluntary  act  in  defending  the  suit  against  Rosenfeld, 
add  to  the  liability  of  the  Indemnity  Company,  and  thus  make 
it  indemnify  Rosenfeld  against  the  consequences  of  his  neg- 
ligence. If  the  Distilling  Company  had  not  defended  the 
suit  brought  by  Hazel  against  Rosenfeld,  clearly  there  would 
have  been  no  liability  of  the  Indemnity  Company  for  the  pay- 
ment of  the  judgment  against  Rosenfeld.  To  allow  the  Dis- 
tilling Company,  by  its  voluntary  act  of  defending  the  suit, 
to  bring  within  the  policy  a  loss  for  which  the  insured  would 
not  otherwise  be  liable,  would  be  to  impose  upon  the  insurer 
a  risk  it  did  not  assume."  Rock  Springs  Distilling  Co.  v. 
Employers'  Indemnity  Co.  of  Philadelphia  (1914)  160  Ky. 
317,  169  S.  W.  730. 

An  insurance  company  is  not  estopped  from  asserting  a 
breach  of  its  policy  by  the  insured  by  undertaking  the  de- 
fense of  a  negligence  action  against  the  insured,  relying 
upon  a  false  representation  of  the  insured;  nor,  apparently, 
can  the  insured  predicate  an  estoppel  on  the  falsity  of  his 
own  representation  even  though  that  is  known  to  the  in- 
surer before  the  trial  of  the  negligence  action.  Morrison  v. 
Royal  Indemnity  Co.  (1917)  180  App.  Div.  709,  167  N.  Y. 
Supp.  731. 

§78.  Miscellaneous. — In  an  action  against  an  insured 
and  his  insurer,  the  trial  court  properly  denied  the  applica- 


84  AUTOMOBILE  INSURANCE  LAW 

tion  of  the  defendant  indemnity  company  to  amend  its  an- 
swer to  show  that  the  automobile  was  not  covered  by  the 
Indemnity  bond,  the  company  offering  to  prove  that  the 
insured  had  sold  the  car  covered  some  six  weeks  .before  the 
accident  and  purchased  a  new  car  which  he  was  using  at 
the  time  and  which  was  not  covered  by  the  bond,  the  appli- 
cation not  being  made  until  the  trial  was  almost  completed 
and  no  claim  being  made  that  the  company  did  not  know 
the  facts  at  the  commencement  of  the  trial.  Ehlers  v.  Auto- 
mobile Liability  Co.  (1919)  169  Wis.  494,  173,  N.  W.  325. 

It  is  not  a  defense  to  an  action  on  a  fire  policy,  where 
the  automobile  was  destroyed  by  fire,  that  the  insured  was 
negligent.  White  v.  Home  Mut.  Ins.  Assn.  of  Iowa  (1920) 
—Iowa— 179  N.  W.  315. 

In  an  action  on  an  automobile  fire  policy  evidence  that 
the  car  was  taken  from  the  place  where  it  was  burned  to  the 
garage  of  the  mortgagee  of  the  car,  and  that  it  was  after- 
wards disposed  of,  by  whom  the  evidence  did  not  disclose, 
and  the  evidence  not  showing  that  the  local  agent  had  any 
authority  in  the  matter,  was  held  properly  excluded.  Glaser 
v.  Williamsburg  City  Fire  Ins.  Co.  (1920)— Ind.  App.— 125 
N.  E.  787. 


PART  II 

MATTERS  PECULIAR  TO  THE    DIFFERENT     KINDS 
OF  AUTOMOBILE  INSURANCE 


CHAPTER  XI. 

Fire  Insurance. 

§  79.  Introductory. 

§80.  Fire  Originating  Within  the   Car. 

§81.  Reporting   Fire   Losses — Dealer's   Policy. 

§  82.  Care  of  Automobile  by  Insured  After  Damage. 

§83.  Valued  Policies. 

§  84.  Same;  Depreciation  in  Value.    ^ 

§  85.  Valued  Policy  Laws. 

§  86.  Deterioration  in  Value;;   Evidence. 

§  86a.  Appreciation  in  Value. 

§79.  Introductory. — A  policy  insuring  an  automobile 
against  destruction  or  damage  by  fire,  theft,  and  the  perils 
of  transportation  is,  for  pleading  purposes  at  least,  a  fire 
policy  nevertheless.  Union  Marine  Insurance  Co.  v.  Charlie^s 
Transfer  Co.  (1914)  186  Ala.  443,  65  So.  78. 

General  reference  is  made  to  the  preceding  chapters,  the 
majority  of  the  cases  cited  in  which  are  concerned  with  auto- 
mobile fire  policies. 

§80.  Fire  Originating  Within  the  Car. — An  automobile 
fire  policy  contained  the  clause :  "It  is  understood  and  agreed 
that  this  policy  does  not  cover  loss  or  damage  caused  *"by 
fire  originating  within  the  vehicle."  It  was  held  that  the 
fair  and  natural  import  and  meaning  of  the  clause  excluded 
loss  by  fire,  danger  of  which  was  inherent  in  the  use  or  oper- 
ation of  the  automobile  itself  without  the  intervention  of 
any  outside  cause  or  agency.  When,  therefore,  the  auto- 
mobile was  damaged  by  fire  originating  in  an  explosion  of 
gasolene  which,  owing  to  the  partial  overturning  of  the  auto- 
mobile in  a  ditch  containing  water,  ran  out  of  its  tank  upon 
the  water,  and  its  vapor,  coming  in  contact  with  the  lighted 
lamps  of  the  automobile,  was  ignited  and  exploded,  causing 
the  fire  and  the  resulting  damage,  it  was  held  that  the  fire 
originated  within  the  vehicle,  and  that  the  policy  did  not 

87 


88  AUTOMOBILE  INSURANCE  LAW 

cover  the  loss.  Preston  v.  Aetna  Insurance  Co.  (1908)  193 
N.  Y.  142,  85  N.  E.  1006. 

§81.  Reporting  Fire  Losses — Dealer's  Policy. — A  fire  in- 
surance contract  with  an  automobile  dealer  consisted  of  the 
policy  and  of  a  rider  or  "slip,"  "Dealer's  Form  Automobile," 
dated  November  24,  1915,  apparently  attached  to  the  policy 
December  15,  1915,  the  time  when  the  policy  was  dated, 
counter-signed  and  presumably  delivered.  By  the  terms  of 
the  policy  and  rider  the  contract  covered  automobiles  held 
by  the  dealer  for  sale.  A  clause  of  the  rider  read :  "All  risks 
attaching  hereunder  are  to  be  reported  to  this  company  as 
soon  as  known  to  the  insured,  but  no  risk  to  be  binding  un- 
less so  reported  and  accepted,  and  for  which  a  certificate 
is  issued  signed  by  a  duly  authorized  agent  of  the  company." 
The  clause  further  provided  that?  "It  is  understood  and 
agreed  that  intentional  failure  to  so  report  such  risk  as  soon 
as  known  to  the  assured  shall  render  this  entire  contract 
null  and  void." 

In  an  action  on  the  policy  the  plaintiff  admitted  that  of 
the  19  automobiles  damaged  by  a  fire  which  occurred,  at 
least  13  had  not  been  reported  "as  soon  as  known"  to  him, 
the  delay  varying  from  15  days  to  17  weeks.  It  was  held 
that  there  being  no  evidence  from  which  compliance  with 
these  precedent  conditions  could  have  been  found  there 
could  be  no  recovery  for  damage  to  the  13  automobiles.  It 
was  unnecessary  for  the  court  to  decide  whether  the  jury 
under  suitable  instructions  could  have  found  that  either  six 
or  four  of  the  19  had  been  duly  reported  and  certified.  The 
plaintiff  having  offered  no  evidence  that  his  failure  to  re- 
port the  13  automobiles  "as  soon  as  known"  arose  from 
unavoidable  mistake  or  excusable  inadvertence,  and  having 
acted  voluntarily  with  full  knowledge  of  the  time  when  he 
acquired  title  to  and  possession  of  each  automobile,  was  con- 
cluded by  the  second  provision  of  the  clause.  Cass  v.  Amer- 
ican Central  Ins.  Co.  (1920)— Mass.— 128  N.  E.  716.  The 
company  never  having  prepared  or  provided  a  form  of  cer- 


FIRE  INSURANCE  89 

tificate  for  reporting  losses  as  provided  by  the  policy,  it  was 
held  that  the  lists  of  automobiles  claimed  to  be  damaged  in 
a  fire  which  the  insured  gave  to  the  insurer's  general  agents, 
who  approved  them,  might  be  found  by  the  jury  to  be  a  form 
of  certificate  which  had  been  recognized  by  the  company  as 
sufficient. 

In  an  action  on  a  dealer's  fire  policy,  issued  February  8, 
1919,  the  defense  was  that  the  insured  had  failed  to  comply 
with  section  6  of  the  policy  by  reporting  and  making  entries 
or  certificates  of  the  automobiles  owned  and  for  sale  by 
them  that  had  been  destroyed  by  the  fire.  The  insured 
alleged  in  reply  that  the  policy  declared  upon  was  but  a 
renewal  of  a  previous  one  issued  to  the  plaintiff  by  the  com- 
pany on  February  8,  1918,  and  that  at  the  time  of  the  is- 
suance of  the  1918  policy,  Phillip  Kaufman,  the  local  agent 
of  the  defendant  company,  orally  agreed  with  a  member  of 
the  insured  company  to  go  to  the  plaintiff's  place  of  business 
from  time  to  time,  check  the  plaintiff's  books  and  cars  on 
hand,  and  make  the  necessary  reports  and  certificates  cover- 
ing such  cars  as  were  insured,  and  cancel  the  insurance  of 
such  cars  as  the  plaintiff  had  sold  or  otherwise  disposed  of; 
that  the  plaintiff's  agent  did  so,  but  that  on  January  10, 
1919,  the  defendant  by  its  agents  made  entries  on  the  pass- 
book referred  to  in  the  policy  or  certificates  covering  six 
of  the  cars  later  burned,  but  by  mistake  omitted  six  of  tRe 
cars  later  burned  which  had  been  reported.  The  question 
in  the  case  was  one  of  waiver ;  whether  the  company's  agent 
could  and  did  waive  the  requirements  of  paragraph  6  of  the 
policy.  The  company  is  and  was,  at  the  times  of  the  issuance 
of  both  policies,  a  California  corporation,  doing  business  in 
Texas,  and  evidently  requiring  the  employment  of  agents 
in  that  state,  Phillip  Kaufman  was  its  agent  in  the  city  of 
Abilene,  and  as  such  issued  both  policies.  The  court  held 
that  the  evidence  tended  to  show  that  at  the  time  of  the 
issuance  of  the  1918  policy  Kaufman  made  the  agreement 
to  himself  make  the  proper  entries  upon  the  passbooks  or 


90  AUTOMOBILE  INSURANCE  LAW 

certificates  as  an  inducement  to  the  plaintiffs  to  insure  their 
automobiles  in  his  company. 

The  Texas  Court  of  Civil  Appeals  held,  on  the  authority 
of   Wagner    &   Chabot    v.   Westchester   Fire    Insurance   Co. 
92  Tex.  549,  50  S.  W.  569,  that  the  requirements  of  section 
6  of  the  policy  were  waived  by  the  company's  agent,  Kauf- 
man.    The  court  said:  "It  may  not  be  amiss,  however,  to 
further  say  that  Phillip  Kaufman,  under  the  terms  of  our 
statutes  (V.  S.  Tex.  Civ.  Statutes,  art.  4961)  was  an  agent  of 
the  appellant  company  'as  far  as  relates  to  all  the  liabilities, 
duties,  requirements,  and  penalties  set  forth'  in  the  chapter 
of  which  the  article  is  a  part.    The  policy  declared  upon  was 
issued  by  him,  and  the  evidence  shows  it  was  in  fact  not  for- 
warded to  the  company  for  approval.  He  knew  or  thought  he 
knew  the  particular  automobiles  which  it  was  his  purpose 
to  insure.    Not  only  the  policy  in  terms  declares  that  it  was 
its  object  and  intent  to  cover,  subject  to  conditions  named 
in  the  policy,  every  automobile  owned  and  for  sale  by  the 
insured,  but  Phillip  Kaufman  testified  that  such  was  his  pur- 
pose at  the  time  of  the  issuance  of  the  policy  of  February 
8,  1919.    We  think  the  transaction  must  be  construed  as  one 
in  which  the  policy  of  1919  was  but  a  renewal  of  the  policy 
of  1918,  even  though  strictly  and  technically  it  should    be 
construed  otherwise,  and  that  evidently  the  agents  issuing 
the  policy  of  February  8,  1919,  had  in  mind  the  report  and 
certificate  made  in  November  and  January    under    the    old 
policy,  and  therefore  were  content  to  make  no  further  in- 
vestigation.    Under  such  circumstances,  we  think  the  issue 
of  waiver  presented  by  the  appellees  in  this  case  must  be 
maintained,  and  that  the  mistake  of  the  agent  in  omitting 
from  the  certificates  made  on  January  10,  1919,  automobiles 
then  actually  on  hand  and  later  actually  destroyed  by  the 
fire  ought  not  to  be   made    chargeable    to    the    appellees." 
California  Insurance  Co.  v.  Bishop  (1920) — Texas  Civ.  App. — 
228  S.  W.    1010. 


FIRE  INSURANCE  91 

§82.     Care  of  Automobile  by  Insured  After  Damage. — In  an 

action  on  a  policy  over  an  automobile  which  was  totally  de- 
stroyed by  two  fires  occurring  a  few  days  apart  one  of  the 
defenses  was  failure  and  neglect  of  the  insured  to  protect 
and  safeguard  the  automobile  from  further  damage  after  the 
first  fire  occurred.  It  was  held  that  the  insurance  company 
could  not  thus  defeat  recovery,  since  the  policy  contained  no 
clause  requiring  the  insured  to  further  safeguard  the  car 
after  the  first  fire.  St.  Paul  Fire  &  Marine  Insurance  v. 
Huff  (1915)— Tex.  Civ.  App.— 172  S.  W.  755. 

§83.  Valued  Policies. — Long  prior  to  the  enactment  of  the 
valued  policy  statutes  valued  policies  were  in  use  as  the 
result  of  contracts.  By  a  valued  policy  a  valuation  was 
fixed  in  advance  by  way  of  liquidated  damages  to  avoid 
making  a  valuation  after  the  loss  had  occurred.  Such  agree- 
ments have  been  uniformly  upheld  against  the  claim  that 
they  were  wagering  contracts ;  the  construction  put  upon  a 
valued  policy  being  that  the  sum  agreed  upon  was  conclusive, 
both  at  law  and  in  equity,  save  in  cases  of  fraud.  Daggs  v. 
Orient  Insurance  Co.  of  Hartford,  136  Mo.  382,  38  S.  W.  85. 
And  where  the  automobile  is  insured  at  a  sum  so  much  be- 
yond its  worth  that  the  gross  overvaluation  amounts  to  af- 
firmative fraud  upon  the  insurance  company,  this  will  avoid 
a  valued  policy.  Hoffman  v.  Prussian  National  Insurance 
Co.  (1918)  181  App.  Div.  412. 

§84.  Same;  Depreciation  in  Value. — From  the  decisions 
cited  in  the  immediately  following  sections,  it  would  appear 
that  the  sum  stated  in  the  policy  is  conclusive  as  to  the  value 
of  the  automobile  at  the  date  of  insurance  only,  but  not  at 
the  time  of  loss.  This  would  seem  to  be  the  reasonable  rule, 
so  far  as  automobile  insurance  is  concerned,  as  it  is  a  well 
known  fact,  which  both  parties  must  be  assumed  to  have 
had  in  mind  when  the  insurance  was  effected,  that  automobiles 
depreciate  in  value  very  rapidly,  even  when  not  in  active 
service.  The  point  has  not,  however,  been  definitely  decided. 


92  AUTOMOBILE  INSURANCE  LAW 

§85.  Valued  Policy  LAWS. — The  Missouri  statute  (section 
7030,  R.  S.  1909),  which  provides:  "No  company  shall  take 
a  risk  on  any  property  in  this  state  at  a  ratio  greater  than 
three-fourths  of  the  value  of  the  property  insured,  and  when 
taken,  its  value  shall  not  be  questioned  in  any  proceeding," 
applies  to  insurance  written  on  personal  as  well  as  real 
property,  and  therefore  applies  to  automobile  insurance.  It 
appears  to  be  something  more  than  what  is  usually  regarded 
as  a  valued  policy  statute,  in  that  it  carries  an  inhibition 
against  every  insurance  company  in  taking  a  risk  at  a  ratio 
greater  than  three-fourths  of  the  value  of  the  property. 
"Such  being  true,  it  estops  the  insurer,  after  the  issuance 
of  a  valid  policy,  from  disputing  that  the  subject-matter 
of  the  insurance  was  of  the  value,  at  the  time  the  policy  was 
issued,  not  only  equal  to  the  amount  of  the  insurance  written 
thereon,  but  one-fourth  more,  as  well."  Farber  v.  American 
Automobile  Insurance  Co.  (1915)  191  Mo.  App.  307,  177  S.  W. 
675. 

In  this  case  the  court  also  said,  however:  "It  seems  to  be 
entirely  clear  that  the  statute  is  designed  only  to  conclude 
the  matter  of  the  value  of  the  subject  of  insurance  stipulated 
in  a  policy  contract  fairly  entered  into  with  respect  to  such 
valuation.  In  other  words,  false  and  fraudulent  representa- 
tions of  fact,  not  mere  expressions  of  opinion,  designedly 
made  with  sinister  motive  relative  to  the  value  of  the  prop- 
erty as  an  inducement  to  the  contract  of  insurance  fixing 
the  valuation,  if  believed  and  acted  upon  by  the  insurer  so 
as  to  cause  the  company  to  issue  a  policy  considerably  in 
excess  of  the  true  value  of  the  property  at  the  time,  should 
be  regarded  not  only  as  material  to  the  risk  but  sufficient 
to  render  the  contract  void  from  its  inception.  In  this  view, 
such  matter  may  be  shown  in  defense  notwithstanding  the 
valued  policy  statute."  The  words  "when  taken"  imply  that 
the  negotiations  antecedent  to  the  policy  shall  be  honest  and 
fair  as  to  material  matters,  to  the  end  that  a  valid  contract 
as  to  value  may  be  had. 


FIRE  INSURANCE  93 

The  Missouri  statute  becomes  a  part  of  the  policy  and  a 
defendant  company  is  precluded  from  denying  the  value  of 
an  insured  automobile  at  the  time  the  policy  was  written. 
Wolff  v.  Hartford  Fire  Ins.  Co.  (1920)— Mo.  App.— 223  S.  W. 
810.  The  statute,  however,  goes  no  further  than  to  es- 
tablish conclusively  the  value  of  the  automobile  at  the  date 
of  the  policy.  And,  where  the  property  insured  is  personalty 
of  a  changing  character,  which  is  subject  to  diminution  or 
depreciation,  such  as  an  automobile,  and  the  policy  provides 
that  the  insurer  shall  not  be  liable  beyond  the  actual  cash 
value  of  the  property  at  the  time  of  the  loss,  the  extent  of 
the  insured's  demand  and  of  the  insurer's  liability  is,  in  the 
case  of  a  total  loss,  the  value  of  the  property  at  the  time  of 
its  destruction  by  fire,  and  this  question  of  the  value  of 
the  property  at  the  time  of  the  fire  is  open  to  dispute  and 
litigation.  And  the  burden  is  on  the  plaintiff  to  show  the 
value  of  the  property  at  the  time  of  the  fire.  Strawbridge  v. 
Standard  Fire  Insurance  Co.  (1916)  193  Mo.  App.  687.  In 
this  case  the  court  said  that  as  between  the  parties  in  an 
action  on  a  valued  policy,  "the  value  of  the  car,  in  respect 
of  insurance,  means  its  actual  value  as  an  instrumentality 
for  continued  use.  If,  through  no  depreciation  inherent  in 
the  car  itself  by  reason  of  the  lapse  of  time,  use,  injury,  or 
damage,  the  car,  as  an  instrumentality  for  continued  use  by 
the  insured,  is  worth  as  much  or  more  than  the  amount 
claimed,  the  insurer  cannot  complain.  He  cannot  add  to 
that  actual  inherent  depreciation  the  decrease  in  the  price 
it  would  bring  simply  because  it  is  not  a  new,  but  is  now 
a  used  or  second-hand  car."  In  other  words,  the  only 
diminution  on  the  value,  as  fixed  by  the  statute  and  the 
policy,  "which  could  be  considered  in  determining  the  loss 
for  which  payment  can  be  demanded  as  insurance,  is  the 
inherent  depreciation  in  the  machine  itself  through  use, 
injury,  or  damage,  accruing  to  it  subsequent  to  the  date  of  the 
policy." 

In  an  action  on  a  Missouri  fire  policy  for  $2,000,  it  was 


94  AUTOMOBILE  INSURANCE  LAW 

held  correct  to  instruct  the  jury,  in  view  of  the  valued  policy 
law,  that  the  automobile  was  worth  $2,666.66  when  insured; 
and  that  they  should  deduct  from  that  amount  any  sum  that 
they  found  the  car  had  depreciated  in  value  from  the  date  it 
was  insured  to  the  date  it  was  burned.  Zackwik  v.  Hanover 
Fire  Ins.  Co.  (1920)— Mo.  App.— 225  S.  W.  135. 

Where  the  insurer,  by  the  terms  of  the  policy,  is  not  re- 
quired to  pay  more  than  the  value  of  the  car  at  the  time  of 
loss,  and  the  insured  refuses  to  tell  or  discuss  the  value,  but 
brings  suit  for  the  full  amount  of  the  policy  less  a  small 
credit  for  the  wreckage  sold,  so  that  the  insurer  cannot 
ascertain,  without  litigation,  what  the  true  condition  and 
value  at  the  time  of  the  loss  were,  there  is  no  room  for  the 
charge  of  a  vexatious  refusal  to  pay  warranting  the  recovery 
of  a  penalty  under  the  Missouri  statute  (Mo.  Rev.  Stat.  1909, 
7068).  Strawbridge  v.  Standard  Fire  Insurance  Co.  (1916) 
193  Mo.  App.  687. 

Any  provision  in  an  automobile  fire  policy  written  since 
March  25,  1909,  in  conflict  with  the  provision  of  the  stan- 
dard form  of  policy  of  the  state  of  Oklahoma,  provided  by 
the  Act  March  25,  1909  and  section  3482,  Oklahoma  Re- 
vised Laws  1910,  will  not  be  enforced  by  the  Oklahoma 
courts.  Section  3482  provides  that  the  insurance  company 
shall  not  be  liable  beyond  the  actual  cash  value  of  the  pro- 
perty at  the  time  any  loss  or  damage  occurs,  and  the  loss 
or  damage  shall  in  no  event  exceed  what  it  would  then  cost 
the  insured  to  repair  or  replace  the  same  in  material  of  like 
kind  and  quality.  The  value  of  an  automobile  wholly  de- 
stroyed by  fire  under  an. Oklahoma  policy  written  since  the 
25th  of  March,  1909,  cannot  be  fixed  by  the  policy,  but  must 
be  determined  by  the  actual  value  of  the  car  destroyed  at 
the  time  of  its  destruction.  When,  in  an  action  upon  an 
Oklahoma  fire  policy  in  the  sum  of  $3,000,  for  the  destruc- 
tion of  the  insured  automobile  by  fire,  the  evidence  was  in 
conflict  as  to  the  value  of  the  automobile  destroyed,  it  was 
held  reversible  error  for  the  court  to  instruct  the  jury  that, 


FIRE  INSURANCE  95 

if  they  found  for  the  plaintiff,  they  must  find  for  the  face 
value  of  the  policy.  The  question  of  the  value  of  the  car 
should  have  been  submitted  to  the  jury.  Palatine  Insurance 
Co.  of  London  v.  Commerce  Trust  Co.  (1918)— Okla.— 175 
Pac.  930. 

§86.  Deterioration  in  Value;  Evidence. — An  attorney  at  law 
who  testified  that  he  had  "personally  owned  three  machines 
during  the  period  of  the  last  five  years,  and  have  personally 
had  the  experience  of  having  a  machine  wrecked,  and  I  have 
been  attorney  for  different  automobile  concerns  and  in  that 
way  keep  in  touch  with  the  business,"  and  that  he  had  fre- 
quently ridden  in  the  automobile  in  question,  was  held  not 
qualified  to  testify  as  an  expert  on  the  question  as  to  whether 
or  not  there  was  any  deterioration  in  the  value  of  the  car  be- 
tween the  time  the  policy  was  issued  and  the  time  of  the  loss. 
The  court  said :  "One  may  own  an  automobile,  or  several  of 
them,  in  fact,  and  yet  never  acquire  any  knowledge  of  the 
mechanism  thereof,  nor  what  parts  thereof  are  subjected  to 
the  greatest  amount  of  wear  and  tear;  nor  would  mere  own- 
ership of  an  automobile  necessarily  give  any  knowledge  of  the 
relative  value  of  a  particular  car  at  fixed  dates;  nor  would 
the  fact  that  one  who  had  been  the  owner  of  several  auto- 
mobiles had  ridden  in  a  particular  machine  a  number  of  times, 
without  more,  throw  any  light  upon  the  question  as  to 
whether  or  not  he  possessed  sufficient  knowledge,  skill,  or 
information  to  qualify  him  as  an  expert  upon  such  subject." 
Wolff  v.  Hartford  Fire  Ins.  Co.  (1920)— Mo.  App.— 223  S.  W. 
810. 

In  an  unreported  case  in  the  federal  district  court  for  tHe 
Northern  District  of  New  York,  McConihe  v.  St.  Paul  Fire 
&  Marine  Ins.  Co.,  which  was  an  action  on  a  valued  policy 
allowing  the  insurance  company  the  option  to  repair,  expert 
testimony  was  admitted  to  show  that  even  if  an  automobile 
had  never  been  used  its  cash  value  would  have  depreciated 
25  per  cent. 


96  AUTOMOBILE  INSURANCE  LAW 

886a.  Appreciation  in  Value. — An  automobile  may  appre- 
ciate, as  well  as  depreciate,  in  value. 

In  a  recent  English  case  it  appeared  that  a  proposal  form 
for  the  insurance  of  an  automobile  contained  a  table  of  rates 
based  on  the  "full  value  of  the  car,"  "but  stated  that  cars 
under  a  certain  price  and  horse-power  could  be  accepted 
at  a  lower  rate.  Under  the  latter  offer  the  car  was  insured 
in  1915,  and  under  the  heading  '"Particulars  of  Car,"  the 
insured  filled  in  his  "estimate  of  present  value"  as  £250.  By 
the  policy  the  insurer  agreed  to  indemnify  the  insured  "to 
an  amount  not  exceeding  the  full  value  of  the  car."  The 
policy  was  renewed  from  year  to  year  till  1919,  when  the 
car  was  detroyed  by  fire,  the  policy  being  still  in  force.  The 
car  had  appreciated  in  value.  It  was  held  that  on  the  last 
renewal  of  the  policy  the  insured  must  be  deemed  to  have 
renewed  his  estimate  of  the  "present  value"  of  the  car  as 
£250,  and  if  at  that  date  the  car  was  worth  more  the  insured 
could  recover  only  that  amount,  but  if  all  the  increase  in 
value  took  place  after  that  date  the  insured  was  entitled 
to  recover  the  full  value  of  the  car  at  the  time  when  it  was 
destroyed.  Wilson  v.  Scottish  Insurance  Corporation, 
Limited,  [1920]  2  Ch.  28;  89  L.  J.  (Ch.)  329;  [1920]  W.  C. 
&  Ins.  R.  107;  123  L.  T.  404;  (1920)  W.  N.  169;  36  T.  L.  K. 
545;  64  S.  J.  514. 


CHAPTER  XII. 

Theft  Insurance. 

§  87.  Intent  to  Steal  Necessary. 

§  88.  "Joy  Riding." 

§  89.  Intent  Shown. 

§  90.  Taking  By  Trick  or  Device  Not  Covered. 

§  91.  Mere  Trespass  Not  Theft. 

§  92.  Conditional  Sales. 

§  93.  Special  Contract  As  to  Conversion — Dealer's  Policy. 

§  94.  Conversion  by  Bailee  Not  Covered. 

§  95.  Theft  by  Person   in  Insured's  Employment. 

§  96.  Theft  by  Person  in  Insured's  Household. 

§  97.  Time  for  Reporting  Loss  by  Theft. 

§  98.  Theft  of  Equipment. 

§  99.  Proof  of  Theft. 

§100.  Cars  Recovered  After  Theft. 

§101.  Time  Within  Which  Recovered  Car  Must  be  Taken  Back. 

§102.  Extent  of  Loss  by  Theft. 

§103.  Unauthorized  Change  in  Contract. 

§87.  Intent  to  Steal  Necessary.— It  is  well  settled  that 
there  must  be  intent  to  steal  to  make  an  insurance  company 
liable  under  a  policy  insuring  against  "theft,  robbery  or 
pilferage."  One  cannot  be  convicted  of  either  theft,  rob- 
bery or  pilferage  unless  he  had  the  intent  to  steal ;  and  there 
is  no  authority  for  giving  any  different  meaning  to  these 
words  in  a  contract  of  insurance  in  which  it  is  stipulated 
that  the  company  will  be  liable  for  loss  or  damage  to  an 
automobile,  resulting  from  theft,  robbery,  or  pilferage.  If 
the  person  taking  the  automobile  had  the  animus  revertcndi, 
the  intention  to  return  it,  he  is  not  guilty  of  theft,  or  robbery, 
or  pilferage,  even  though  he  took  the  machine  without  the 
owner's  consent.  Hartford  Fire  Insurance  Co.  v.  Wimbish 
(1913)  12  Ga.  App.  712,  78  S.  E.  265;  Michigan  Commercial 
Insurance  Co.  v.  Wills  (1914)  57  Ind.  App.  256,  106  N.  E.  725. 

The  intent  to  steal  is  a  necessary  ingredient  in  all  three 
offenses.  Phoenix  Assurance  Co.  v.  Epstein,  (1917)  73  Fla. 

97 


98  AUTOMOBILE  INSURANCE  LAW 

991,  75  So.  537,  Hartford  Fire  Insurance  Co.  v.  Wimbish 
supra. 

Such  a  policy  does  not  cover  a  loss  where  the  automobile 
was  wrecked  while  lawfully  in  the  possession  of  an  em- 
ployee of  a  garage  company,  under  instructions  to  deliver 
it  to  the  owner,  although  the  employee  went  out  of  his  way 
in  making  the  trip..  Stuht  v.  Maryland  Motor  Car  Insur- 
ance Co.  v.  Wimbush  (1913)  12  Ga.  App.  712,  78  S.  E.  265. 

The  fact  that  the  person  taking  the  automobile  was  guilty 
of  a  misdemeanor  under  the  state  "automobile  act"  would 
not  authorize  a  recovery  by  the  owner,  if  there  was  no 
showing  of  an  intent  to  steal.  Hartford  Fire  Insurance 
Co.  v.  Wimbish  (1913)  12  Ga.  App.  712,  78  S.  E.  265. 

An  automobile  insured  against  "theft,  robbery,  or  pilferage" 
was  taken  from  the  owner's  garage  without  his  knowledge 
by  persons  unknown  and  returned  in  a  damaged  condition. 
The  owner's  statement  of  claim  to  the  insurance  company 
set  forth  a  loss  of  $97.80,  including  for  tools,  $4.20 ;  repair  bill, 
$63.60;  vulcanizing  inner  tubes,  $5;  damage  to  top  and  cur- 
tains, $25 ;  and  unearned  premium,  $6.50,  (the  insurance  com- 
pany having  canceled  the  policy  prior  to  its  termination 
by  its  terms).  It  was  held  that  the  damage  and  loss  were 
not  within  the  terms  of  a  policy  providing  against  "theft, 
robbery,  or  pilferage" ;  that  "pilferage"  has  but  one  meaning 
and  is  some  form  of  stealing.  Felgar  v.  Home  Insurnace 
Co.  of  New  York  (1917)  207  111.  App.  492. 

§88.  "Joy  Riding." — It  follows  from  what  has  been  said 
that  an  owner  cannot  recover  on  a  finding  of  facts  showing 
that  his  automobile  was  wrongfully  taken  for  the  purpose 
of  a  "joy  ride,"  but  not  disclosing  any  intention  to  steal  it. 
Michigan  Commercial  Insurancce  Co.  v.  Wills  (1914)  57 
Ind..  App.  256,  106  N.  E.  725 ;  Phoenix  Assurance  Co.  v. 
Epstein  (1917)  73  Fla.  991,  75  So.  537. 

An  automobile  insured  against  loss  resulting  from  theft 
was  left  in  a  paint  shop  by  the  owner  to  be  repainted.  Men 
employed  in  the  shop  appropriated  it  for  the  purpose  of 


THEFT  INSURANCE  99 

taking  a  joy  ride,  in  the  course  of  which  it  was  injured.  It 
was  held  that  the  car  was  not  stolen,  and  the  insurance  com- 
pany was  not  liable  under  the  policy.  The  fact  that  the 
taking  was  altogether  wrongful  and  that  it  was  the  intention 
of  the  men  to  appropriate  the  car  to  their  own  use  during  the 
ride  and  to  that  extent  to  deprive  the  owner  of  the  use  of 
their  property  was  not  .'sufficient  to  constitute  their  acts 
larceny.  They  must  have  had  a  criminal  intent — the  inten- 
tion to  steal  the  car,  to  permanently  deprive  the  owner 
thereof.  Valley  Mercantile  Co.  v.  St.  Paul  Fire  &  Marine 
Ins.  Co.  (1914)  49  Mont.  430,  143  Pac.  559. 

889.  Intent  Shown. — An  automobile  dealer's  employee, 
on  being  discharged  because  of  dull  business,  borrowed  an 
automobile  from  the  dealer  to  search  for  employment, 
promising  to  return  it  in  a  day  or  two.  After  trying  to 
sell  it  within  the  state  (Kentucky)  he  drove  it  to  Missouri, 
where  it  was  found  some  six  or  seven  weeks  later  in  a 
remote  part  of  the  state  in  a  badly  battered  and  damaged 
condition.  It  was  held  that  this  was  as  effectual  a  conver- 
sion as  if  he  had  actually  sold  the  machine  and  appropriated 
the  proceeds.  Federal  Insurance  Co.  v.  Hiter  (1915)  164 
Ky.  743,  176  S.  W.  210. 

In  an  action  on  an  automobile  theft  policy,  it  was  held  that 
the  evidence  showed  a  theft  with  felonious  intent  where  it 
appeared  that  a  discharged  servant  of  the  plaintiff,  whose 
duties  in  the  plaintiff's  employment  did  not  include  driving 
an  automobile,  unlocked  the  garage  and  put  the  batteries  and 
other  equipment  on  the  car  and  drove  it  away  without  the 
owner's  knowledge  or  consent,  and  the  equipment  was  not 
on  the  car  when  it  was  returned  by  him  in  a  damaged  con- 
dition. Pask  v.  London  &  Lancashire  Fire  Insurance  Co. 
(1915)  211  111.  App.  271. 

§90.  Taking  by  Trick  or  Device  Not  Covered. — The  or- 
dinary theft  policy  does  not  cover  larceny  by  trick  or  de- 
vice, involving  the  deception  of  the  insured.  An  owner 


100  AUTOMOBILE  INSURANCE  LAW 

insured  against  direct  loss  or  damage  by  theft,  robbery  or 
pilferage  gave  it  into  the  possession  of  a  corporation  for 
the  purpose  of  having  it  sold.  In  an  action  on  the  policy  the 
complaint  alleged  that  the  corporation,  pursuant  to  a  con- 
spiracy and  with  felonious  intent,  procured  a  large  number 
of  owners,  including  the  plaintiff,  to  deliver  them  their  auto- 
mobiles for  sale,  and  thereafter  converted  and  stole  the 
car.  It  was  held  that  this  complaint  did  not  state  facts  suf- 
ficient to  constitute  a  cause  of  action.  The  court  said: 
"While  this  policy  insures  against  'theft/  it  seems  clear  that 
it  was  not  the  intention  of  the  parties  to  the  contract  of 
insurance  to  insure  against  larceny  by  trick  and  device ;  that 
is,  theft,  the  commission  of  which  involves,  as  an  essential 
element,  the  deception  of  the  insured,  resulting  in  a  sur- 
render of  the  possession  of  his  property.  The  term  'theft/ 
as  used  in  this  policy,  does  not  include  all  forms  of  larceny 
recognized  by  law.  It  does  not  include  a  larceny  perpetrated, 
as  this  was,  under  the  form  and  guise  of  a  business  trans- 
action, conducted  by  the  insured  himself."  Delafield  v. 
London  &  Lancashire  Fire  Ins.  Co.  (1917)  177  N.  Y.  App. 
Div.  477,  164  N.  Y.  Supp.  221. 

If  the  insured,  the  owner  of  the  automobile,  was  deprived 
of  its  possession  by  reason  of  an  honest  dispute  with  the 
taker  as  to  his  title  and  possession,  the  taker  merely  using 
a  trick  to  obtain  what  he  thought  was  his  property,  the 
insured's  damages  are  not  covered  either  by  the  direct  terms 
or  even  liberal  intendment  of  the  policy.  Rush  v.  Boston 
Insurance  Co.  (1914)  88  Misc.  (N.  Y.)  48,  150  N.  Y.  Supp. 
457.  The  court  said:  "To  recover  under  such  a  policy  the 
insured  must  unquestionably  show  that  the  car  was  stolen. 
He  has  no  cause  of  action  against  the  insurance  company, 
even  though  he  has  been  wrongfully  deprived  of  his  pro- 
perty, unless  he  has  been  so  deprived  of  his  property  fel- 
oniously. The  criminal  intent,  however,  in  such  cases  must 
usually  be  gathered  from  the  surrounding  circumstances, 
and  proof  of  the  taking  by  trick  and  device  would  be  suf- 


THEFT  INSURANCE  101 

ficient  to  allow  an  inference  of  felonious  intent.  Never- 
theless, this  inference  would  be  completely  rebutted  if  tfie 
insurance  company  can  show  that  the  taker  of  the  car  acted 
under  an  honest  belief  that  he  was  entitled  to  the  possession 
of  it,  and  merely  used  a  trick  to  obtain  what  he  thought  was 
his  own  property." 

§91.  Mere  Trespass  Not  Theft. — A  mere  trespass  will  not 
render  the  insurance  company  liable  under  a  theft  policy. 
The  wife  of  one  A —  was  the  owner  of  an  automobile 
and  gave  her  husband  a  power  of  attorney  to  sell  it.  He  sold 
it  to  Bigus  who  took  possession  of  it  and  fastened  the  doors 
of  the  barn  where  it  was  kept.  He  then  insured  the  car 
against  "direct  loss  by  burglary,  theft  or  larceny."  Shortly 
afterwards  A's  wife,  who  had  some  difficulty  with  her 
husband,  took  the  car  from  the  barn  and  transferred  it  to 
another  barn.  Bigus  notified  the  insurance  company  of  the 
loss  of  the  car,  which  could  not  be  found,  and  he  then  brought 
suit  on  the  policy.  It  was  held  that  the  policy  only  covered 
a  felonious  asportation  or  taking,  and  it  was  manifest  that 
the  taking  shown  was,  at  most,  a  trespass  against  which  there 
was  no  insurance.  Bigus  v.  Pacific  Coast  Casualty  Co.  (1910) 
145  Mo.  App.  170,  129  S.  W.  982. 

§92.  Conditional  Sales. — The  owner  of  an  automobile,  in- 
sured against  theft,  robbery  or  pilferage,  placed  the  car  in 
a  garage,  under  an  agreement  with  the  garage  keeper  that 
the  latter  should  pay  him  a  specified  sum  therefor,  payment 
to  be  made  after  the  garage  keeper  had  sold  the  car.  The 
garage  keeper  disposed  of  the  automobile  the  same  day  for 
a  less  sum,  and  converted  the  proceeds  to  his  own  use.  The  in- 
surance company  was  held  not  liable  under  the  policy,  under 
New  York  Sales  Act,  §  100,  providing  that,  when  goods  are 
delivered  to  the  buyer  on  sale  or  return,  the  property  passes 
to  the  buyer  on  delivery.  Siegel  v.  Union  Assur.  Soc.  (1915) 
90  Misc.  (N.  Y.)  550,  153  N.  Y.  Supp.  662. 


102  AUTOMOBILE  INSURANCE  LAW 

A  policy  insured  the  owner  of  a  motorcycle  and  one  Arthur, 
"as  interest  may  appear,"  against  theft,  robbery  and 
pilferage,  the  owner  having  sold  the  machine  to  Arthur  on 
a  conditional  bill  of  sale.  Arthur  left  the  state  with  the 
machine.  He  claimed  that  it  had  been  stolen  from  him  and 
gave  notice  to  the  insurance  company.  Arthur  assigned  his 
claim  against  the  insurance  company  to  the  owner.  The 
insurance  company,  after  investigation,  became  satisfied  that 
the  machine  had  not  been  stolen  from  Arthur  and  denied  its 
liability  to  the  owner.  In  an  action  by  the  owner  it  was  held 
he  was  entitled  to  recover  the  amount  due  and  unpaid  him 
for  the  purchase  price.  Neal,  Clark  &  Neal  Co.  v.  Liverpool 
&  London  Globe  Ins.  Co.  (1917)  178  App.  Div.  730,  165  N. 
Y.  Supp.  204. 

§93.     Special  Contract  as  to  Conversion. — Dealer's  Policy. 

— An  automobile  dealer,  in  conversation  with  the  agent  of  an 
insurance  company,  who  was  seeking  the  dealer's  business, 
told  him  that  he  desired  to  be  protected  in  all  cases  of  lease 
contracts.  The  agent  promised  that  his  company  would 
fully  protect  the  dealer  if  he  would  insure  his  automobiles 
with  it,  and  stated,  according  to  the  dealer,  that  the  policies 
of  the  company  would  be  protection  against  "fire,  theft,  and 
wrongful  conversion,"  and  that  he  would  have  the  company 
write  the  dealer  to  that  effect.  In  accordance  with  this  un- 
derstanding, the  company's  secretary  wrote  the  dealer  on 
June  8,  1916.  that  the  company  would  from  that  date  extend 
policies  on  all  cars  in  which  the  dealer  had  an  equity  to  cover 
any  claims  arising  under  specified  conditions,  one  of  which 
was :  "If  the  conditional  buyer  of  an  automobile,  or  any  mem- 
ber of  his  immediate  family,  should  steal  any  automobile 
insured  under  our  policies,  and  thereby  commit  a  felony, 
upon  warrant  being  secured  for  the  arrest  of  such  party  or 
parties,  the  company  hereby  agrees  that  your  equity  in  any 
automobile  insured  by  this  company  will  be  fully  protected." 
This  instrument  was  never  recalled.  The  dealer  sold  a  car 


THEFT  INSURANCE  103 

to  a  customer  on  installments  and  a  policy  was  issued  by 
the  company  on  June  12,  1917,  covering  the  parties'  interests. 
On  September  15,  1917,  the  vendee  of  the  car  disappeared 
from  the  neighborhood,  taking  the  car  with  him.  It  was  held 
in  an  action  against  the  insurance  company  that  the  letter 
of  June  8,  1916,  and  the  policy  constituted  one  contract ; 
and  that  the  letter  became  a  part  of  every  contract  of  in- 
surance entered  into  between  the  parties  after  its  date,  unless 
expressly  excluded  from  such  contracts.  The  word  "steal" 
was  held  to  have  been  used  by  the  parties  in  the  above  agree- 
ment in  its  broad  and  colloquial  sense,  to  include  embezzle- 
ment or  wrongful  conversion  by  the  vendee,  this  being  what 
the  letter  was  given  to  protect  the  insured  against.  Conver- 
sion of  the  automobile  was  held  shown  by  evidence  that  the 
conditional  vendee  took  the  automobile  out  of  the  state  with- 
out the  seller's  knowledge  or  consent;  that  he  concealed  it, 
so  that  the  seller  could  not  locate  it  by  the  aid  of  detectives ; 
and  that  installments  on  the  price  had  not  been  paid  since 
the  date  of  the  disappearance  of  the  car.  Buxton  v.  Inter- 
national Indemnity  Co.  (1920)— Cal.  App.— 191  Pac.  84. 

§94.  Conversion  by  Bailee  Not  Covered. — An  owner 
brought  suit  for  the  value  of  an  automobile  under  a  policy 
protecting  her  against  "theft,  robbery  or  pilferage,  excepting 
by  any  person  or  persons  in  the  insured's  household  or  in 
the  insured's  service  or  employment,  whether  the  theft,  rob- 
bery or  pilferage  occur  during  the  hours  of  such  service  or 
employment  or  not."  The  evidence  disclosed  that  the  plain- 
till  had  been  induced  to  purchase  the  car,  a  second-hand  one, 
by  virtue  of  the  representations  of  one  Miller,  an  auto- 
mobile mechanic,  who  at  the  time  of  the  purchase  was  a 
lodger  of  the  plaintiff ;  that  shortly  thereafter  the  car  got  out 
of  order,  and  that  the  plaintiff  stated  to  Miller,  who  in  the 
meantime  had  removed  from  the  plaintiff's  residence,  that  it 
was  "up  to  him  to  fix  it";  that  the  car  was  turned  over  to 
Miller  for  such  purpose  under  the  statement  quoted,  and 


104  AUTOMOBILE  INSURANCE  LAW 

without  any  understanding  that  Miller  was  to  receive  com- 
pensation for  his  services  in  repairing  it.  The  evidence  in- 
dicated that  after  the  car  had  been  entrusted  to  Miller  he 
fraudulently  converted  it  to  his  own  use.  Upon  these  facts 
a  non-suit  was  granted,  which  was  affirmed  on  appeal  for  the 
following  reason :  "Under  the  terms  of  such  a  policy,  written 
to  indemnify  an  owner  against  loss  by  'theft,  robbery  or  pil- 
ferage/ the  usual  and  ordinary  meaning  of  these  words,  in- 
volving the  wrongful  and  fraudulent  taking  and  carrying 
away  of  the  article  stolen,  should  have  application,  and  the 
reasonable  intention  of  the  contract  should  not  be  extended 
to  cover  the  fraudulent  conversion  by  a  bailee  of  the  property 
so  entrusted.  The  true  and  manifest  intent  and  spirit  of 
the  contract  should  not  be  so  technically  construed  as  to  re- 
quire that  it  partake  of  the  nature  of  a  blanket  fidelity  bond 
guaranteeing  the  integrity  of  all  such  persons  as  may  be 
entrusted  by  the  owner  with  the  possession  and  control  of 
the  article  covered  by  the  policy  of  insurance."  Gunn  v. 
Globe  &  Rutgers  Fire  Insurance  Co.  (1919)  24  Ga.  App.  615, 
101  S.  E.  691. 

§95.  Theft  by  Person  in  Insured'*  Employment — A  usual 
exception  in  a  theft  policy  is  theft  by  a  person  in  the  in- 
sured's  service  or  employment.  A  taking  by  such  a  person 
is  not  within  the  policy,  and  damage  resulting  from  such 
taking  is  not  covered.  Phoenix  Aussurance  Co.  v.  Epstein 
(1917)  73  Fla.  991,  75  So.  537. 

To  be  in  the  service  or  employment  of  the  insured,  within 
the  meaning  of  such  a  policy,  a  person  taking  the  automobile 
must  have  been  subject  to  the  control  and  direction  of  the 
insured  and  bound  to  render  him  personal  service.  The  em- 
ployee of  a  public  garage  keeper,  at  whose  garage  the  car 
was  kept,  is  not  in  the  insured's  employ,  and  the  policy 
covers  theft  by  such  a  person.  Schmid  v.  Heath,  (1912)  173 
111.  App.  649. 

Where  the  insured  automobile  was  stored  in  a  garage  be- 
longing to  a  corporation  of  which  the  owner  of  the  insured 


THEFT  INSURANCE  105 

car  was  president,  evidence  that  the  caretaker  of  the  garage 
was  implicated  in  the  theft  of  the  car,  which  was  afterwards, 
while  in  his  possession,  wrecked  in  a  collision,  was  held  in- 
sufficient to  establish  that  the  damage  was  done  by  one  in 
the  employment  or  service  of  the  insured  within  the  meaning 
of  the  policy.  Callahan  v.  London  &  Lancashire  Fire  Ins.  Co. 
(1917)  98  Misc.  (N.  Y.)  589, 163  N.  Y.  Supp.  322. 

Under  a  theft  policy  excepting  theft  by  persons  in  the  in- 
sured's  household  or  service  or  employment  it  was  held  that 
the  company  was  liable  to  the  owner  who  had  given  the  keys 
of  his  garage,  in  good  faith,  for  the  purpose  of  having  his 
car  washed,  but  without  undertaking  to  pay  anything  for  the 
service,  to  a  chauffeur  in  the  employment  of  another,  who 
used  the  car  for  his  own  personal  purpose,  resulting  in  the 
wrecking  of  the  car.  Ouimet  v.  National  Ben  Franklin  Fire 
Insurance.  Co.  (1920)  Que.  C.  R.  56  Dom.  L.  R.  501. 

The  question  whether  the  automobile  was  or  was  not 
stolen  by  a  person  in  the  insured's  employment  may  be  a 
question  for  the  jury.  The  salesman  of  a  Detroit  firm  of 
automobile  manufacturers,  engaged  in  selling  cars  for  his 
employers,  was  using  a  new  car  for  demonstration  purposes. 
The  company  gave  the  salesman  special  permission  to  take 
the  car  out  in  the  evening,  contrary  to  its  usual  rules,  to 
demonstrate  to  prospective  customers.  He  took  the  cus- 
tomers for  a  ride,  and  left  the  car  in  front  of  a  hotel  for 
twenty  minutes.  When  he  returned  it  was  gone.  In  an 
action  on  a  theft  policy  it  was  held  error  to  direct  a  verdict 
for  the  plaintiff.  The  evidence  of  theft  was  purely  circum- 
stantial and  the  fact  that  some  one  in  the  plaintiff's  service 
had  no  guilty  participation  in  the  disappearance  of  the  car 
was  not  indisputably  established.  The  jury  might  infer  from 
the  circumstances,  the  delay  of  the  salesman  to  report  the  loss 
till  next  morning,  giving  the  thief  a  start  of  ten  or  twelve 
hours,  that  he  was  privy  to  the  taking  of  the  car,  or  that  he 
was  innocent.  The  credibility  of  the  salesman  and  the  bona 
fides  of  his  conduct  with  reference  to  the  theft  were  issues 


106  AUTOMOBILE  INSURANCE  LAW 

for  the  jury.  Kansas  City  Regal  Auto  Co.  v.  Old  Colony  Ins. 
Co.  (1915)  187  Mo.  App.  514. 

§96.     Theft  by  Person  in   Insured's  Household— Theft  by 

a  member  of  the  insured's  houshold  is  also  usually  excepted 
from  the  risks  insured  against.  The  theft  of  an  insured  auto- 
mobile by  the  owner's  nephew,  while  the  nephew  was  residing 
with  the  insured  as  his  guest,  falls  within  the  exception  of 
theft  by  "any  person  or  persons  in  the  assured's  household, 
or  in  the  assured's  service  or  employment."  While  such  a 
policy  was  in  force  the  insured's  nephew,  about  18  years  of 
age,  came  to  his  uncle's  house  in  Baltimore  on  February  3, 
1919,  for  a  visit,  the  prospective  duration  of  which  was  not 
disclosed.  Some  time  during  the  night  of  February  7th,  tfie 
nephew  went  to  his  uncle's  bedroom  while  the  latter  was 
sleeping,  took  the  switch  key  of  the  automobile  from  his 
uncle's  pocket,  went  to  the  garage  where  the  automobile  was 
stored,  and  by  misrepresentations  (that  his  uncle  was  dying 
and  it  was  necessary  to  fetch  a  doctor)  induced  the  watchman 
to  take  it  out.  He  drove  the  car  to  Alexandria,  Va.,  where 
he  sold  it.  He  was  subsequently  arrested  and  pleaded  guilty 
to  larceny  of  the  car  in/Baltimore.  The  car  was  discovered 
several  days  after  the  theft  in  a  garage  in  Alexandria.  It  was 
not  in  running  order  and  bore  evidence  of  severe  usage.  The 
insured  took  possession  of  it,  had  temporary  repairs  made, 
brought  it  to  Baltimore,  sold  it  for  $1,200,  though  it  had  cost 
him  $2,120,  and  claimed  of  the  insurance  company  as  a  loss 
under  the  policy  the  difference  between  the  initial  cost  of  the 
car,  plus  repairs  and  the  selling  price. 

The  trial  court  held  that  under  the  language  of  the  policy 
the  insurance  company  was  not  liable  and  the  automobile 
was  excepted  from  the  policy.  Judgment  for  the  insurance 
company  was  affirmed,  the  court  saying  that  the  object  and 
purpose  of  an  exception  such  as  this  is  "to  guard  the  company 
against  liability  for  such  thefts  as  we  have  in  this  case,  and 
to  prevent  fraud  and  collusion  by  and  between  the  assured 
and  persons  in  a  household  or  in  the  assured's  services  or 


THEFT  INSURANCE  107 

employment."     Rydstrom  v.  Queen  Insurance  Co.  of  Amer- 
ica. (1921)— Md.— 112  Atl.  586. 

§97.  Time  for  Reporting  Loss  by  Theft. — The  time  for 
rendering  statement  of  loss  commences  to  run  from  the  time 
of  theft,  and  not  from  the  time  that  the  insured  discovered 
it.  But  the  insurance  company  may  waive  the  requirement 
as  to  rendering  the  statement  by  denying  liability  before  the 
expiration  of  such  time.  Neal,  Clark  &  Neal  Co.  v.  Liverpool 
&  London  &  Globe  Ins.  Co.,  (1917)  178  App.  Div.  730,  163 
N.  Y.  Supp.  204. 

§98. — Theft  of  Equipment. — A  provision  in  a  theft  policy 
"excepting  in  any  case  other  than  in  case  of  total  loss  of  the 
automobile  described  herein,  the  theft,  robbery  or  pilferage  of 
tools  and  repair  equipment"  does  not  mean  that  the  company 
is  only  liable  for  the  whole  automobile  when  there  is  a  total 
loss,  but  means  that  the  company  is  only  liable  for  the  loss 
of  the  tools  when  there  is  a  total  loss  of  the  automobile. 
Ouimet  v.  National  Ben  Franklin  Fire  Insurance  Co.  (1920) 
Que.  C.  R.  56  Dominion  L.  R.  501 ;  See  also  Pask  v.  London 
&  Lancashire  Fire  Insurance  Co.  (1915)  211  111.  App.  271, 
§  96  supra. 

§99.  Proof  of  Theft. — Theft  must  be  determined  by  the 
facts  attending  the  taking  of  the  automobile.  The  mere  state- 
ment of  a  witness  in  a  civil  action  concerning  an  insured  auto- 
mobile that  the  car  "was  stolen"  is  insufficient.  Federal  In- 
surance Co.  v.  Munden  (1918)— Tex.  Civ.  App.— 203  S.  W.  917. 

An  action  to  recover  under  a  policy  of  automobile  insur- 
ance against  theft  is  a  civil  action,  and  the  plaintiff  is  required 
to  prove  his  case  only  by  a  preponderance  of  the  evidence ; 
the  rule  being  the  same  as  it  is  in  civil  cases  generally.  Buxton 
v.  International  Indemnity  Co.  (1920) — Cal.  App.— 191  Pac. 
84 ;  but,  to  recover  at  all,  he  has  the  burden  of  proving  every 
element  of  the  crime  of  larceny.  Valley  Mercantile  Co.  v. 
St.  Paul  Fire  &  Marine  Ins.  Co.,  (1914)  49  Mont.  430,  143  Pac. 
559;  Phoenix  Assurance  Co.  v.  Eppstein  (1917)  73  Fla.  991, 


108  AUTOMOBILE  INSURANCE  LAW 

75  So.  537  (where  the  evidence  adduced  by  the  plaintiff,  not 
detailed  in  the  opinion,  was  held  not  to  measure  up  to  this 
requirement).    The  failure  of  the  insurance  company  to  offer 
any  evidence  in  rebuttal  of  the  plaintiff's  evidence  as  to  theft 
does  not  alone  warrant  the  direction  of  a  verdict  for  the 
plaintiff.    Kansas  City  Regal  Auto  Co.  v.  Old  Colony  Insur- 
ance Co.  (1915)  187  Mo.  App.  514.    Where  the  evidence  does 
not  conflict,  the  question  of  whether  the  car  was  stolen  is  for 
the  court.     The  following  testimony  for  the  plaintiff,  being 
undisputed,  was  held  insufficient  to  take  the  question  of  the 
theft  of  an  insured  car  to  the  jury.     It  appeared  that  the 
plaintiff  (the  insured)  was  out  of  the  city  where  he  lived  and 
had  left  the  car  in  charge  of  a  third  party;  that  the  latter 
had  used  it  on  the  day  in  question,  and  parked  it  near  his 
office,  and  on  his  return  later  it  was  gone.    Judgment  for  the 
plaintiff,  on  a  directed  verdict,  was  affirmed.    Stone  v.  Amer- 
ican Mutual  Auto  Insurance  Co.   (1921)— Mich. — 181  N.  W. 
973.    In  this  case  it  appeared  that  after  the  loss  the  plaintiff 
(the  insured)  had  assigned  his  right  to  recover  therefor  to 
the  party  who  had  charge  of  the  car,  but  a  reassignment  had 
been  made  to  the  plaintiff  before  suit  was  brought.     This 
party  was  cross-examined  as  to  these  transfers,  and  after 
stating  that  the  plaintiff  owed  him  $800  at  the  time  the  trans- 
fer was  made,  he  was  asked:  "What  was  that  for?"  To  this 
an  objection  was  interposed  and  sustained.    The  reason  as- 
signed by  counsel  for   its  materiality  was :  "This  witness  was 
very  closely  associated  with  the  disappearance  of  this  car." 
It  was  held  that  the  matter  was  collateral  to  the  issue  pre- 
sented and  that  there  was  no  prejudicial  error  in  the  ruling 
of  the  court. 

Where  there  is  at  least  prima  facie  evidence  of  theft,  it  is 
error  to  direct  a  verdict  for  the  defendant.  In  an  action  on  a 
theft  policy  the  plaintiff  proved  that  he,  accompanied  by  two 
friends,  drove  the  automobile  aboard  a  ferryboat  crossing 
the  Hudson  river  from  Englewood,  N.  J.,  to  Dyckman  street, 
N.  Y.  He  'placed  the  machine  close  up  to  the  front  of  the 
boat,  put  on  the  emergency  brake  and  stopped  the  engine.  He 


THEFT  INSURANCE  109 

and  his  friends  then  went  into  the  cabin  before  the  boat 
started.  There  was  no  other  vehicle  on  the  boat  on  that  trip. 
Some  minutes  later,  and  when  the  boat  was  out  on  the  river, 
they  all  came  out  and  found  the  machine  gone,  the  chain  at 
the  rear  of  the  boat  lying  loose  on  the  deck,  and  the  gate  at 
the  rear  half  way  open.  It  was  held  that  these  facts  were 
prima  facie  proof  of  theft,  and  a  directed  verdict  for  the  de- 
fendant was  reversed  and  a  new  trial  granted.  Chepakoff 
v.  National  Ben  Franklin  Fire  Ins.  Co.  (1916)  97  Misc.  (N.  Y.) 
320,  161  N.  Y.  Supp.  283 

See  as  to  proof  of  conversion  Buxton  v.  International 
Indemnity  Co.  (1920)— Cal.  App.— 191  Pac.  84,  Supra.  §93. 

§100.  Cars  Recovered  After  Theft. — This  type  of  insurance 
being  indemnity  insurance,  the  company  is  only  required  to 
make  the  insured  whole  in  case  of  loss  under  the  policy 
rather  than  pay  the  face  of  the  policy,  and  where  the  car 
has  been  recovered  the  plaintiff  must  receive  it  back  on 
payment  by  the  company  of  all  damages  caused  by  the  theft, 
if  offered  prior  to  the  time  stipulated  for  payment  of  the 
loss.  Kansas  City  Royal  Auto  Co.  v.  Old  Colony  Ins.  Co., 
(1917)  196  Mo.  App.  225,  195  S.  W.  579;  Callahan  v.  London  "& 
Lancashire  Fire  Ins.  Co.,  (1917)  98  Misc.  (N.  Y.)  589,  163 
N.  Y.  Supp  322. 

But  an  insurer  does  not  discharge  its  obligation  by  notify- 
ing the  insured  owner  of  a  car  stolen  in  Kansas  City  that 
the  car  is  in  a  garage  at  Peoria,  111.,  and  offering  to  turn  over 
the  car  to  the  owner  there  and,  in  addition,  to  pay  all  dam- 
ages caused  by  the  theft.  Plaintiff  is  thus  without  knowledge 
of  the  damages  to  the  car,  of  what  liens  may  have  been 
created  against  it  since  the  theft,  the  exact  cost  of  returning 
it  to  Kansas  City,  or  the  time  that  would  be  lost  in  having 
it  returned.  The  car  need  not  be  returned  to  the  exact  spot 
where  it  was  stolen,  but  it  should  be  brought  to  a  place  in 
the  city  where  it  was  stolen  where  the  owner  may  con- 
veniently receive  it.  The  return  of  the  car  to  the  city  where 
it  was  stolen  may  be  waived  by  the  owner.  Such  waiver 


110  AUTOMOBILE  INSURANCE  LAW 

must  be  shown  by  clear  and  distinct  evidence.  Kansas  City 
Royal  Auto  Co.  v.  Old  Colony  Ins.  Co.,  (1917)  196  Mo.  App. 
255,  195  S.  W.  579 

A  theft  policy  gave  the  insurance  company  30  days  after 
proof  of  loss  in  which  to  make  payment.  Before  the  expi- 
ration of  the  30-day  period  the  insurer  and  insured  adjusted 
the  loss,  the  company  drawing  a  draft  for  the  amount  and  de- 
livering it  to  the  insured.  Next  day  it  stopped  payment,  on 
information  that  the  car  had  been  found.  It  was  held  that 
the  transaction  did  not  amount  to  an  account  stated  so  as 
to  permit  of  an  independent  action  thereon.  The  court  said: 

"No  rights  of  third  persons  intervened  and  the  defendants 
had  the  right,  when  the  automobile  was  found,  being  prior 
to  the  expiration  of  the  30  days,  to  stop  payment  of  the 
draft.  It  stands  to  reason  that  if  the  stolen  property  is 
found  before  the  defendants  are  in  default  of  their  liability 
to  pay  for  it,  they  should  not  be  bound  unless  some  new 
binding  contract  has  arisen  between  the  parties.  In  'the 
absence  of  evidence  to  the  contrary,  and  as  a  practical  matter, 
we  must  assume  that  the  parties  to  the  adjustment  and  the 
draft  acted  with  the  understanding  that  if  the  automobile 
was  found  before  the  draft  was  paid,  the  liability  for  in- 
demnity then  automatically  ceased."  Frost  v.  Heath,  (1918) 
211  111.  App.  454. 

In  an  action  on  a  theft  policy  it  was  held  that  the  con- 
tention of  the  insurance  company  that  it  conclusively  ap- 
peared that  there  was  no  abandonment  of  the  automobile 
to  the  company  was  not  sustained  by  the  evidence  (not  de- 
tailed in  the  opinion)  ;  that  in  the  view  most  favorable  to 
the  company  it  was  a  qustion  of  fact  which  the  company 
did  not  ask  to  have  submitted  to  the  jury.  Foote,  J.,  dis- 
sented upon  the  ground  that  up  to  the  time  the  stolen  car 
was  found  and  recovered,  the  insured  had  not  abandoned  the 
car  to  the  company,  but  was  entitled  to  claim  the  car  as 
his  property  had  he  deemed  it  for  his  interest  so  to  do ;  if  he 
had  this  right,  then  the  company  had  an  equal  right  to 
restore  the  car  to  the  insured.  More  v.  Continental  In- 


THEFT  INSURANCE  111 

surance  Co.,  (1915)  169  App.  Div.  914,  affirmed  222  N.  Y.  607; 
Radice  v.  National  Fire  Insurance  Co.,  (1920)  190  App.  Div. 
893,  following,  /  without  opinion,  More  v.  Continental  In- 
surance Co.,  supra. 

In  an  action  on  a  theft  policy,  evidence  that  the  insured 
purchased  a  new  automobile  shortly  after  the  theft  was  heTH 
not  relevant  to  the  issue.  O'Connor  v.  Maryland  Insurance 
Co.  (1919)  287  111.  204,  122  N.  E.  489 

§101.  Time  Within  Which  Recovered  Car  Must  be  Taken 
Back. — The  owner  of  an  automobile  insured  it  against  theft 
for  one  year  from  March  31,  1916,  through  an  agent  of  the 
insurance  company.  On  Sunday  evening,  September  10,  1916, 
he  left  the  car  at  the  corner  of  La  Salle  and  Randolph  streets, 
in  Chicago,  while  he  went  to  a  near  by  restaurant,  asking  a 
street  railway  employee  to  watch  it.  A  few  minutes  there- 
after a  young  man  jumped  into  the  car,  unlocked  it  and  drove 
away.  The  next  day  the  insured  went  to  the  insurance  com- 
pany's agent's  office  and  reported  his  loss  and  also  sent  a 
letter  detailing  the  circumstances.  About  five  days  after- 
wards the  insured  bought  a  new  car,  giving  his  note  there- 
for and  assigning  the  policy  to  the  company  from  which  he 
bought  the  automobile  as  collateral  security  for  the  note.  On 
November  15,  1916,  the  Chicago  police  department  notified 
the  insured  that  they  had  recovered  the  stolen  car,  and  he 
accompanied  a  police  officer  to  a  down-town  garage,  where 
he  identified  it  as  the  car  which  had  been  stolen  from  him. 
He  refused,  however,  to  take  it,  on  the  ground  that  he  was 
entitled  to  the  insurance  money  under  the  policy  and  that  the 
car  belonged  to  the  insurance  company,  and  he  wrote  the 
company  to  that  effect,  stating  that  he  intended  to  use  the 
money  from  the  policy  to  pay  off  the  note  given  for  the  new 
car.  The  company  refused  to  pay  the  policy,  on  the  ground 
that  the  car  had  been  recovered,  and  that  the  insured  could 
have  it  if  he  desired.  The  insured  brought  suit  for  a  recovery 
under  the  policy  on  February  21,  1917.  The  car  was  insured 
for  an  amount  not  exceeding  $1,375  against  loss  by  fire,  and 
also  "against  loss  or  damage  by  theft  or  robbery  by  any  per- 


112  AUTOMOBILE  INSURANCE  LAW 

son  or  persons  other  than  those  in  the  employment,  service 
or  household  of  the  insured."  The  policy  provided  that  the 
company,  in  case  of  loss  or  damage,  should  be  liable  only  for 
the  actual  cost  of  repairing  or  replacement  with  the  addition 
of  the  words  "but  there  can  be  no  abandonment  to  this  com- 
pany of  the  property  described"  and  providing  also  for  notice 
and  protection  from  further  loss  or  damage  by  the  insured. 
The  last  provision  of  the  policy,  particularly  necessary  to  be 
considered  in  connection  with  the  case,  read  as  follows :  "The 
sum  for  which  this  company  is  liable  pursuant  to  this  policy 
shall  be  payable  sixty  days  after  the  notice,  ascertainment, 
estimate  and  satisfactory  proof  of  the  loss  herein  required 
have  been  received  by  this  company."  The  Chicago  Munici- 
pal Court  directed  a  verdict  in  the  insured's  favor  for  $1,375 
and  costs. 

On  account  of  the  importance  of  the  questions  involved 
the  Illinois  Appellate  Court,  after  affirming  the  judgment  for 
the  insured,  certified  the  case  to  the  Illinois  Supreme  Court, 
which  affirmed  the  Appellate  Court's  judgment  for  the  fol- 
lowing reasons :  "There  can  be  no  question  that  on  prin- 
ciple the  ih eft  of  an  automobile  insured  against  theft  and 
subsequently  recovered  presents  a  case  somewhat  analogous 
to  the  capture  of  an  insured  ship  in  time  of  war  which  is 
subsequently  recovered  from  the  enemy  and  restored  to  the 
owner." 

"Abandonment,  in  its  technical  sense,  means  the  relinquish- 
ment  of  a  right;  the  giving  up  of  something  to  which  one  is 
entitled;  the  giving  up  of  a  thing  absolutely,  without  ref- 
erence to  any  particular  person  or  purpose.  In  maritime  law 
it  mean,?  relinquishment  to  the  underwriters  of  all  claim. 
Time  is  not  an  essential  element  of  abandonment.  The  mo- 
ment the  intention  to  abandon  and  the  relinquishment  of 
possession  unite  the  abandonment  is  complete.  Abandon- 
ment is  not  necessary  when  the  loss  is  actually  total,  nor  can 
the  abandonment  be  made  unless  the  loss  is  constructively 
total.  It  is  never  obligatory  upon  the  insured  bur  operates 
only  as  a  voluntary  transfer  of  title." 


THEFT  INSURANCE  113 

It  u-as  held  to  be  manifest  from  the  provisions  of  the  policy 
above  mentioned  that  it  was  intended  there  should  not  be  any 
voluntary  abandonment  by  the  insured  to  the  comuany,  using 
that  word  in  its  technical  sense,  but  it  was  also  considered 
apparent  from  leading  and  construing  the  provisions  of  the 
policy  together  that  it  was  intended  that  there  could  be  no 
recovery  for  a  total  loss  of  the  automobile  if  the  insurance 
company  desired  to  replace  the  property  on  giving,  in  ac- 
cordance with  the  terms  fixed  by  the  policy,  the  required 
notice.  The  policy  also  provided  that  the  sum  for  which  the 
company  was  liable  should  be  payable  in  sixty  days  after 
notice  and  satisfactory  proof  of  the  loss.  While  there  could 
be  no  question  that  the  liability  of  the  company  might  be 
affected  by  the  return  of  the  automobile  and  the  giving  of  the 
required  notice  before  the  expiration  of  the  sixty  days,  the 
court  was  disposed  to  hold  that  if,  after  the  notice  and  sat- 
isfactory proof  of  loss  were  given,  sixty  days  had  expired 
before  the  finding  and  return  of  the  automobile,  the  policy 
intended  that  there  might  be  full  recovery  from  the  com- 
pany for  the  value  of  the  automobile,  and  this  without  ref- 
erence to  the  question  of  abandonment.  As  the  court  con- 
strued this  policy  as  to  loss  by  theft,  the  term  "abandon- 
ment," as  used  in  the  quoted  provision,  was  intended  to  mean 
that  there  could  be  no  voluntary  abandonment  (using  the 
word  in  the  technical  sense)  by  the  owner  before  the  expira- 
tion of  the  sixty  days. 

"This  suit  was  instituted  after  the  lapse  of  sixty  days 
from  the  notice  and  proof  of  loss,  but  after  the  automobile 
had  been  found.  Counsel  for  appellant,  (the  insurance  com- 
pany), seem  to  concede  that  if  the  suit  had  been  instituted 
before  the  automobile  had  been  found,  under  the  reasoning  of 
the  English  cases,  the  insured  could  have  recovered  for  the 
full  amount  of  the  machine, — that  is,  that  the  date  of  the 
starting  of  the  suit  fixed  the  time  of  recovery  for  a  total  loss 
if  the  machine  had  not  been  found  before  that  date.  Obvious- 
ly, in  order  to  make  an  insurance  policy  of  this  kind  of  value 
to  the  owner  of  the  property  there  must  be  some  time  fixed 


114  AUTOMOBILE  INSURANCE  LAW 

after  which  the  return  of  the  automobile  will  not  release  the 
company  from  liability.  Automobiles  are  so  generally  used 
in  business  affairs  and  other  activities  of  life  that  public 
policy  requires  that  a  person  having  a  theft  policy  should 
not  be  compelled  to  wait  indefinitely  on  the  chance  of  having 
the  stolen  automobile  recovered  or  be  compelled  to  incur 
the  expense  of  buying  a  new  one  and  thereafter  taking  the 
old  one  back  if  recovered.  Fairly  construed,  we  think,  this 
insurance  policy  intended  to  fix  the  date  at  sixty  days  after 
the  notice  and  satisfactory  proof  of  loss  had  been  received  by 
the  company, — in  other  words,  to  fix  the  date  at  which  the 
insured  would  not  be  compelled  to  take  the  stolen  car  back, 
even  if  recovered,  at  the  date  when  the  insurance  money  was 
agreed  to  be  paid."  O'Connor  v.  Maryland  Motor  Insurance 
Co.,  (1919)  287  111.,  204,  122  N.  E.  489. 

§102.  Extent  of  Loss  by  Theft. — The  proper  construction 
of  a  policy  insuring  against  damages  directly  resulting  from 
theft,  robbery  or  pilferage  is  that  "it  covers  all  damages  result- 
ing, or  which,  in  the  contemplation  of  the  parties,  might  re- 
sult, from  theft,  which  would  include  damages  caused  by 
reckless  driving  or  handling  of  the  car  and  storage  of  the 
same,  or  any  use  which  destroyed  its  value  in  whole  or  in 
part.  If,  following  the  theft,  the  car  should  be  recovered 
intact,  in  the  same  condition  it  was  before  the  theft,  the 
plaintiff's  only  damage  would  be  expenses  incurred  in  re- 
covering the  car,  and,  perhaps,  in  addition,  the  value  of  its 
use  during  the  period  between  the  theft  and  the  recovery  of 
the  car.  If  the  car  were  damaged  or  destroyed  while  in  the 
custody  of  the  thief,  the  plaintiff's  damage  would  include  also 
the  diminution  or  loss  of  value  of  the  car  thus  stolen."  If 
the  car  should  be  wrecked  by  collision  after  the  theft  and 
totally  destroyed,  the  defendant  would  be  liable  for  its  value. 
Callahan  v.  London  and  Lancashire  Fire  Ins.  Co.  (1917)  98 
Misc.  (N.  Y.)  589,  163,  N.  Y.  Supp.  322. 

A  policy  "against  loss  or  damage  if  amounting  to  $25  or 
more  on  any  single  occasion  by  theft,  robbery  or  pilferage" 


THEFT  INSURANCE  115 

provided  in  another  part  of  the  policy  that  "  in  the  event  of 
loss  or  damage  under  this  policy,  this  company  shall  be  liable 
only  for  the  actual  cost  of  repairing,  or,  if  necessary,  re- 
placing the  parts  damaged  or  destroyed."  It  is  held  that, 
notwithstanding  the  latter  clause,  diminution  in  the  value 
of  an  automobile  stolen  and  abandoned  in  a  damaged  condi- 
tion is  within  the  policy.  Federal  Insurance  Co.  v.  Hiter, 
(1915)  164  Ky.,  743,  176  S.  W.  210. 

Under  a  theft  policy  expressly  providing  that  any  act  of 
the  insured  in  recovering,  saving  and  preserving  the  property, 
in  case  of  loss  or  damage,  shall  be  "considered  as  done  for 
the  benefit  of  all  concerned,  *  *  *  and  all  reasonable  expenses 
thus  incurred  shall  constitute  a  claim  under  this  policy"  an 
insured  may  recover  the  amount  paid  a  detective  agency  in 
attempting  to  recover  the  automobile  after  its  theft.  Buxton  v. 
International  Indemnity  Co.  (1920)— Cal.  App.— 191  Pac.  84. 

Under  a  policy  protecting  a  dealer's  equity  in  automobiles 
sold  under  conditional  contract  and  converted  by  the  condi- 
tional vendee,  an  insured  was  held  entitled  to  recover  the 
amount  of  the  unpaid  installments,  plus  interest  thereon, 
the  conditional  contract  providing  for  payment  of  interest 
on  all  deferred  payments  from  the  date  of  contract.  Buxton 
v.  International  Indemnity  Co.  (1920)— Cal.  App.— 191  Pac.  84. 

§103.  Unauthorized  Change  in  Contract. — An  application 
for  a  theft  policy  with  a  mutual  insurance  association  was 
made  when  the  association  was  insuring  cars  against  theft 
throughout  the  state  of  Nebraska,  ( including  the  city  of 
Omaha,  but  between  that  date  and  the  issuance  of  the  policy 
it  adopted  an  amendment  to  its  by-laws,  declaring  that  "thett 
insurance  under  any  policy  shall  stand  suspended  and  the 
association  will  pay  no  theft  loss  when  the  car  is  left  standing 
unattended  on  the  streets,  in  the  parks  or  other  public  places 
in  any  of  the  following  towns."  including  in  the  list  Omaha. 
In  writing  up  the  policy,  the  association,  without  notice  to 
the  applicant  and  without  authority  from  him  included  this 
provision  in  the  alleged  copy  of  the  application.  The  applica- 


116  AUTOMOBILE  INSURANCE  LAW 

tion,  providing  for  insurance  for  one  year  from  January  8, 
1918,  was  approved  by  the  secretary  of  the  association  January 
14,  1918.  Some  days  later  the  association  issued  its  policy  to 
the  applicant  and  sent  it  to  their  local  agent,  who  held  it  for 
the  applicant  until  after  the  loss  of  the  car  by  theft  in  Omaha 
on  January  24,  1918.  The  loss  was  duly  reported  to  the 
company,  which  repudiated  liability,  relying  on  the  quoted 
exemption  and  a  provision  in  the  application  that  the  ap- 
plicant agreed  to  be  "governed  by  the  articles  of  incorporation 
and  by-laws  now  in  force  or  hereafter  made  by  the  associa- 
tion." It  was  held,  in  an  action  on  the  policy,  that  this  pro- 
vision did  not  authorize  the  association  to  insert  in  the  copy  of 
the  application  embodied  in  the  policy  the  quoted  clause  not 
contained  in  the  original  application  without  the  insured's 
knowledge ;  the  provision  giving  the  association  no  authority 
to  make  any  essential  changes  in  the  contract  obligation  dur- 
ing the  life  of  the  policy.  Johnson  v.  Home  Mut.  Ins.  Assn., 
(1921)— Iowa— 181  N.  W.  244. 


CHAPTER  XIII 

Collision  Insurance 

§104.  In  General. 

§105.  Distinction  Between  Collision  and  Accident  Policy. 

§106.  Collision   "With  Any   Object." 

§107.  Upsets  Excluded. 

§108.  Collision  With  Roadbed  Excluded. 

§109.  Fall  of  Automobile  Into  Elevator  Shaft  Covered. 

§110.  Fall  of  Floor  on  Automobile   Not  Covered. 

§111.  Fall  of  Steam   Shovel  on  Autotruck  Covered. 

§112.  Violation  of  Law  by  Insured. 

§104.  In  General. — Until  the  advent  of  the  automobile,  in- 
surance against  collision  was  practically,  if  not  wholly,  con- 
fined to  marine  insurance.  There  are  many  decisions  in  that 
branch  of  insurance  law  determining  when  vessels  are  in 
collision,  and  these  are  sometimes  cited  in  automobile  in- 
surance collision  cases.  But  the  marine  insurance  holdings 
are  far  from  uniform;  and,  so  far,  the  same  may  be  said  of 
the  rapidly  growing  number  of  automobile  insurance  collision 
cases.  Universal  Service  Co.  v.  American  Insurance  Co.  of 
Newark,  N.  J.  (1921)— Mich.— 181  N.  W.  1007. 

§105.     Distinction  Between  Collision  and  Accident  Policy. 

— A  collision  policy  is  not  necessarily  an  accident  policy,  at 
least  if  it  is  not  expressly  so  stated  in  the  policy.  A  collision 
policy  in  the  ordinary  terms  contained  no  reference  to  acci- 
dents. In  an  action  on  the  policy  it  was  held  prejudicial  for 
the  trial  court  to  instruct  the  jury  "that  if  you  shall  find  and  be- 
lieve from  the  evidence  that  the  defendant  did  insure  plaintiff 
herein  against  the  loss  or  damage  by  accident  as  alleged  in 
petition  filed  in  this  case,  and  plaintiff  sustained  such  loss 
or  damage  by  accident  as  alleged  in  said  petition,  during  the 
life  of  said  policy  of  insurance,  then  your  verdict  must  be  for 
the  plaintiff."  "It  will  be  noted,"  the  court  said,  "that  the 

117 


118  AUTOMOBILE  INSURANCE  LAW 

policy  did  not  insure  plaintiff  against  loss  or  damage  by 
accident,  and  that  something  more  was  necessary  to  entitle 
plaintiff  to  recover  other  than  his  merely  sustaining  a  loss 
or  damage  by  accident,  namely,  it  was  necessary  that  the 
damage  be  sustained  by  being  in  collision  with  another  auto- 
mobile, vehicle  or  object.  The  owner  of  an  automobile  in- 
sured by  a  policy  of  this  character  may  suffer  damage  by 
accident  in  a  great  many  ways  that  cannot  constitute  damage 
by  collision,  and  which  would  not  entitle  him  to  recovery. 
The  instruction  purports  to  cover  the  entire  case,  and  to 
direct  a  verdict,  and  that  therefore  said  error  is  prejudicial, 
and  could  not  be  cured  by  other  instructions  given,  needs  no 
citation  of  authorities."  Rouse  v.  St.  Paul  Fire  &  Marine 
Insurance  Co.  (1920)— Mo.  App.— 219  S.  W.  688. 

§106.  Collision  "With  Any  Object."— The  courts  have 
found  considerable  difficulty  in  the  construction  of  the  words 
"with  any  object"  in  collision  policies,  and  references  to  this 
phrase  will  be  found,  not  only  in  this  section,  but  in  the  cases 
in  the  immediately  succeeding  sections. 

Injury  caused  by  running  one  of  the  wheels  of  the  car  into 
a  hole  six  or  seven  inches  deep  and  eighteen  inches  wide 
between  the  car  tracks  on  a  city  street  is  not  within  the 
meaning  of  a  policy  insuring  against  damages  from  "collision 
with  any  object."  Dougherty  v.  Insurance  Company  of  North 
America  (1910)  19  Pa.  Dist.  547,  38.  Pa.  Co.  Ct.  119. 

The  burden  is  upon  the  plaintiff  to  prove  a  collision  with- 
in the  terms  of  the  policy. 

An  automobile  insured  against  injury  resulting  from  col- 
lision with  some  "object,  either  moving  or  stationary,"  was 
injured  while  running  along  a  road  in  New  Jersey.  The  side 
of  the  road  sloped  from  the  edge  of  the  macadam  roadbed 
at  an  angle  of  30  to  45  degrees  into  a  deep  ditch.  At  a  turn 
in  the  road  the  machine  met  a  horse  and  wagon  approaching 
from  an  opposite  direction.  The  automobile  turned  out  of  the 
road  upon  the  side  of  the  ditch,  the  hind  wheels  skidding  on 
the  turn,  thus  throwing  the  rear  of  the  machine  further  into 
the  ditch  than  the  front  wheels.  In  attempting  to  regain 


COLLISION  INSURANCE  119 

the  road  the  right  hand  front  wheel  collapsed  and  the 
automobile  turned  over  twice,  and  was  seriously  damaged. 
In  an  action  on  the  policy  proof  was  given  of  the  above  facts, 
and  the  trial  court  inferred  that  there  must  have  been  a  col- 
lision. There  was  no  evidence  given  of  the  existence  of  any  ob- 
ject with  which  the  automobile  did  or  could  have  come  into 
collision.  On  appeal  the  court  said  that  if  it  were  to  speculate 
upon  the  causes  of  the  injury  to  the  car,  the  facts  pointed 
more  strongly  to  the  collapse  of  the  wheel  from  strain  than 
from  collision.  It  was  shown  that  the  earth  was  soft  on  the 
side  of  the  ditch,  and  the  wheels  that  left  the  road  sank  three 
or  four  inches  into  the  earth.  The  spokes  of  the  right  front 
wheel  were  all  broken  off  at  the  hub.  The  tire  was  intact. 
As  the  machine  was  tipped  to  the  right  by  the  slope  of  the 
bank,  the  weight  would  largely  rest  upon  that  wheel..  The 
skidding  of  the  rear  wheels  would  place  a  great  strain 
upon  the  right  front  wheel,  sunk  three  or  four  inches  in  dirt. 
The  condition  of  the  front  wheel  would  seem  to  negative  the 
theory  of  collision.  Could  the  tire  withstand  a  blow  so 
violent  as  to  break  every  spoke  on  the  wheel?  The  trial 
court  should  not  have  speculated  on  the  cause  of  the  collapse 
of  the  wheel.  That  should  have  been  proved.  Hardenbergh 
v.  Employers'  Liability  Assur.  Corp.,  Ltd.,  (1913)  80  Misc. 
(N.  Y.)  522.  141  N.  Y.  Supp.  502,  reversing  Hardenbergh  v. 
Same,  78  Misc.  (N.  Y.)  105,  138  N.  Y.  Supp.  662. 

In  an  action  on  a  policy  insuring  automobiles  against  loss 
from  damage  "resulting  from  the  collisions  of  said  auto- 
mobiles with  any  other  automobile,  vehicle  or  object,  ex- 
cluding *  *  *  damage  resulting  from  collisions  due  wholly  or 
in  part  to  upset,"  the  insured  claimed  that  the  automobile 
was  injured  by  a  collision  with  a  "brick,  stone  or  other  solid 
substance."  The  insurance  company  contended  that  to  con- 
stitute a  collision  both  objects  must  be  in  motion,  and  cited 
several  marine  insurance  cases  holding  this  to  be  the  mean- 
ing of  the  word.  It  was  held  that  the  word  "collision"  was 
not  to  be  limited  to  cases  where  both  colliding  objects  were 


120  AUTOMOBILE  INSURANCE  LAW 

in  motion.  Lepman  v.  Employers  Liability  Assurance  Corp., 
Ltd.,  (1912)  170  111.,  App.  379.  The  court  said.  "If  it  had  been 
the  understanding  of  the  insurer  that  its  liability  would  be 
limited  to  those  cases  where  there  was  a  striking  of  the 
automobile  and  a  moving  object,  the  word  'moving'  would 
doubtless  have  been  placed  before  the  word  'object/  " 

In  a  case  in  the  Illinois  Appellate  Court,  not  fully  reported, 
a  judgment  for  the  plaintiff  was  reversed  where  the  evidence 
showed  that  the  insured  automobile  was  not,  as  alleged,  at 
the  time  in  question  in  collision  with  any  post  or  any  other 
stationary  object.  Cantwell  v.  General  Accident  Fire  &  Life 
Assur.  Corp.  (1917)  205  111.  App.  335. 

§107.  Upsets  Excluded. — In  an  action  on  a  policy  insuring 
an  automobile  "from  collision  with  any  moving  or  stationary 
object;  excluding  however  *  *  *  (c.)  damage  resulting  from 
collision  due  wholly  or  in  part  to  upsets,"  it  appeared  that  the 
automobile  ran  off  a  highway  bridge,  crashing  through  the 
guard  rail,  was  precipitated  into  the  stream  below,  turned  up- 
side down  after  leaving  the  bridge  and  rested  in  an  inverted 
position  on  the  bed  of  the  stream.  The  trial  court  directed  a 
verdict  for  the  defendant.  On  appeal  it  was  held  that  the 
plaintiff  was  entitled  to  damages  unless,  within  the  meaning 
of  the  policy,  the  moving  or  stationary  object  must  be  per- 
pendicular instead  of  horizontal.  There  were  no  words  in 
the  policy  limiting  the  meaning  of  the  object  to  a  per- 
pendicular one.  It  was  held  that  the  liability  seemed  to  be 
within  the  express  terms  ,of  the  policy.  But,  assuming  that 
there  was  such  ambiguity  in  the  terms  of  the  policy  as  would 
make  it  at  least  doubtful  as  to  whether  collision  with  water 
and  land,  horizontal  objects,  was  within  the  "terms  of  the 
policy,  the  words  used  in  the  policy  would  be  interpreted 
most  strongly  against  the  insurer  where  the  policy  was  so 
framed  as  to  leave  room  for  two  constructions. 

On  the  question  of  upset,  the  court  said  that  it  could  not 
be  said  that  the  collision  of  the  automobile  with  the  water 
and  land  under  the  water  was  caused  by  an  upset.  "It  may 


COLLISION  INSURANCE  121 

be  that  the  car  upset  by  reason  of  contact  with  the  water  or 
the  earth,  but  the  collision  was  not  due  to  an  upset — the  upset 
may  have  been  the  result  of  the  collision.  The  provision  in 
the  policy  cannot  mean  that  where  collision  has  first  taken 
place,  there  can  be  no  recovery  because,  as  the  result  of  the 
collision,  the  machine  is  upset.  When  the  car  ran  off  the 
bridge,  dynamic  force  and  gravitation  determined  the  posi- 
tion in  which  it  would  strike  first  the  water  and  then  the  bed 
of  the  stream.  Its  final  position  was  merely  incidental  to 
the  collision."  Judgment  for  the  defendant  was  therefore 
reversed  and  a  new  trial  ordered.  Harris  jv.  ^American 
Casualty  Co.  of  Reading,  Pa.,  (1912)  "83  N.  J.  L.  641. 

An  automobile  was  insured  against  loss  "by  being  in  col- 
lision during  the  period  insured  with  any  other  automobile, 
vehicle  or  object,  excluding  *  *  *  damiage  caused  by  striking 
any  portion  of  the  roadbed  or  by  striking  the  rails  or  ties 
of  street,  steam  or  electric  railroads."  While  the  automobile 
was  being  used  by  an  agent  of  the  insured  for  pleasure  riding 
at  night,  the  agent  by  accident  ran  it  off  the  main  road  and 
down  a  bank  of  three  or  four  feet  into  a  river,  damaging  the 
car.  It  was  held  that  the  accident  was  not  within  the  policy, 
was  "so  obviously  outside  of  the  quoted  stipulation  of  the 
policy  that  discussion  seems  superfluous.  In  order  to  bring 
the  case  within  the  policy  there  must  have  been,  first,  a 
collision;  second,  the  collision  must  have  been  with  another 
automobile,  vehicle,  or  somewhat  similar  object,  ejusdem 
generis;  and  third,  it  must  not  have  been  with  any  portion  of 
the  roadbed,  meaning  the  ground  on  which  the  machine  was 
running  or  attempting  to  run.  No  such  collision  was  shown 
as  that  insured  against."  Wettengel  v.  United  States  "Lloyds" 
(1914)  157  Wis.  433,  147  N.  W.  360.  The  court  distinguished 
the  case  of  Harris  v.  American  Casualty  Co.,  83  N.  J.  Law, 
641,  supra,  where  the  policy  was  different,  adding  that  it  was 
disposed  to  doubt  the  soundness  of  that  decision  even  upon 
the  different  contract  there  in  question.  In  the  later  case 
of  Bell  v.  American  Issurance  Co.  (1921)  Wis.  181  N.  W. 
733,  the  Wisconsin  Supreme  Court  said,  referring  to  the 


122  AUTOMOBILE  INSURANCE  LAW 

Wettengel  case:  "A  further  consideration  of  the  subject 
doQs  not  remove  the  doubts  there  expressed." 

In  Bell  v.  American  Insurance  Co., supra,  it  is  held  that  the 
striking  of  the  ground,  resulting  from  one  side  of  the  car 
settling  into  the  ground  and  the  car  tipping  over,  is  not  a 
collision  within  the  meaning  of  such  a  policy.  An  insured 
was  driving  his  automobile  down  a  street  and  turned  on  an 
avenue  with  the  intention  of  backing  out  and  turning  around. 
He  had  crossed  the  cross-walk  by  six  or  eight  feet,  practically 
stopped  his  car,  the  power  being  in  neutral,  preparatory  to 
backing  out.  One  side  of  the  car  gradually  settled  into  the 
ground  and  the  car  tipped  over.  The  insured  sued  the  com- 
pany to  recover  the  damage  to  the  car  by  its  coming  into 
contact  with  the  ground  at  the  time  of  the  upset.  Bell  v. 
American  Insurance  Co.,  (1921)— Wis.— 181  N.  W.  733.  The 
court  said:  "With  the  definitions  of  lexicographers  as  a 
basis,  it  is  easy  to  demonstrate  that  the  incident  resulting 
in  damage  to  plaintiff's  automobile  constituted  a  collision. 
Thus: 

"A  collision  is  the  meeting  and  mutual  striking  or  dashing 
of  two  or  more  moving  bodies  or  of  a  moving  body  with  a 
stationary  one."  Century  Dictionary.  "Object"  is  defined 
to  be  "that  which  is  put,  or  which  may  be  regarded  as  put, 
in  the  way  of  some  of  the  senses,  something  -visible  or 
tangible."  Webster's  Dictionary.  An  automobile  is  an  object. 
Upon  the  overturning  of  an  automobile  its  forcible  contact 
with  the  earth  constitutes  a  "mutual  striking  or  dashing  of 
a  moving  body  with  a  stationary  one."  Hence  the  forcible 
contact  of  the  automobile  with  the  earth  on  the  occasion 
of  the  upset  constituted  a  collision. 

"Upon  its  face  this  appears  to  be  good  logic,  but  the  con- 
clusion is  neither  convincing  nor  satisfying.  One  instinctively 
withholds  assent  to  the  result.  The  reason  is  that  it  makes 
a  novel  and  unusual  use  and  application  of  the  word  'collision.' 
We  do  not  speak  of  falling  bodies  as  colliding  with  the 
earth.  In  common  parlance  the  apple  falls  to  the  ground; 
it  does  not  collide  with  the  earth.  So  with  all  falling  bodies. 
We  speak  of  the  descent  as  a  fall,  not  a  collision.  In  popular 


COLLISION  INSURANCE  123 

understanding  a  collision  does  not  result,  we  think,  from  the 
force  of  gravity  alone.  Such  an  application  of  the  term 
lacks  the  support  of  'widespread  and  frequent  usage.' " 

"The  incident  causing  the  damage  to  the  automobile  here 
in  question  is  spoken  of  in  common  parlance  as  an  upset  or 
tip-over.  If  it  were  the  purpose  to  insure  against  damage 
resulting  from  such  an  incident,  why  should  not  such  words, 
or  words  of  similar  import,  have  been  used?  We  cannot 
presume  that  the  parties  to  the  contract  intended  that  an 
upset  should  be  construed  as  a  collision  in  the  absence  of  a 
closer  association  of  the  two  incidents  in  popular  under- 
standing." 

Under  a  policy  expressly  covering  damage  to  the  auto- 
mobile "if  caused  solely  by  collision  with  another  object, 
either  moving  or  stationary"  and  excluding  all  damage  caused 
by  upset  unless  such  upset  is  a  direct  result  of  such  a  collision, 
there  is  no  recovery  for  damage  to  a  car  which,  in  coming 
down  a  steep  grade  at  a  high  rate  of  speed,  got  out  of  the 
road  on  a  sharp  tarn  and  upset  on  the  brink  of  a  hill  without 
colliding  with  anything  and  rolled  down  the  hill  and  there 
collided  with  a  tree.  Stuht  v.  United  States  Fidelity  and 
Guaranty  Co.,  (1916)  89  Wash.  93,  154  Pac.  137. 

§108.  Collision  with  Roadbed  Excluded.  —  A  collision 
policy  covered  damage  to  the  car  by  being  "in  collision  with 
any  other  automobile,  vehicle  or  object  *  *  *  excluding 
damages  caused  by  striking  any  portion  of  the  roadbed." 

The  word  "object"  as  used  here  does  not,  it  is  held,  mean 
"some  object  similar  to  an  automobile  or  vehicle,"  within 
the  ejusdem  generis  rule,  but  must  be  construed  in  the 
ordinary  acceptance  of  the  word  to  imply  that  which  is 
tangible  or  visible.  Under  this  definition  it  was  held  that 
an  embankment  outside  the  traveled  road  which  the  car  hit 
after  it  had  skidded  and  overturned  and  was  rolling  into  the 
ditch  at  the  roadside  was  within  the  policy.  The  court  re- 
fused to  consider  the  embankment  part  of  the  roadbed,  and 
so  excepted  by  the  policy,  holding  that  the  term  "roadbed" 
applies  only  to  that  portion  of  the  road  which  was  constructed 


124  AUTOMOBILE  INSURANCE  LAW 

and  used  for  travel.  Rouse  v.  St.  Paul  Fire  &  Marine  Insur- 
ance Co.,  (1920)— Mo.  App.— 219  S.  W.  688. 

A  policy  insured  against  loss  "by  collision  with  another 
object,  either  moving  or  stationary,  excluding,  however,  *  *  * 
all  loss  or  damage  caused  by  striking  any  portion  of  the 
roadbed  or  any  impediment  consequent  upon  the  condition 
thereof."  In  an  action  for  damage  by  collision  with  the 
curbing  along  a  street  it  was  held  that  if  the  curbing  was 
a  part  of  the  street  or  roadway,  the  plaintiff  could  not  say 
that  he  had  left  the  roadbed  when  he  collided  with  the  curb- 
stone. A  curbing  or  curbstone  along  a  street  was  held  to  be 
both  a  "portion  of  the  roadbed"  and  an  "impediment  con- 
sequent upon  the  condition  thereof"  and  both  of  these  were 
exceptions  and  not  insured  against.  Gibson  v.  Georgia  Life 
Insurance  Co.,  (1915)  17  Ga.  App.  43,  81  S.  E.  335,  distinguisH- 
ing  Hanover  v.  Georgia  Life  Insurance  Co.,  (1914)  141  Ga. 
389,  81  S.  E.  206,  where,  under  a  similar  policy,  it  was  alleged 
that  the  car  left  the  roadbed,  and  after  crossing  a  ditch  on 
the  side  of  the  road,  collided  with  the  bank  on  the  further 
side  of  the  ditch,  and  it  was  held  that  the  petition  was  not 
subject  to  general  demurrer,  because,  "when  the  plaintiff 
averred  that  he  had  left  the  roadbed,  we  do  not  think  we  can 
say,  as  a  matter  of  law,  that  he  alleged  facts  which  shows 
that  the  accident  fell  within  the  exception." 

In  another  case,  where  collision  with  any  portion  of  the 
roadbed  was  excepted,  it  was  held  that,  although  the  gutter 
of  a  street  is  within  and  a  part  of  the  street  or  roadway  with 
respect  to  the  power  of  a  city  to  construct,  improve  and 
maintain  streets,  it  is  not  a  portion  of  the  roadbed  when  con- 
sidered with  reference  to  the  subject  matter  contemplated 
in  such  a  policy,  that  the  roadbed  contemplated  consisted  of 
that  portion  between  the  gutters  on  either  side,  which  was 
constructed  for  travel,  and  not  to  the  gutters,  designed  for 
the  purpose  of  draining  water  from  the  adjacent  roadbed. 
At  the  same  time,  the  court  said  that  if  the  language  was 
doubtful  it  was  to  be  construed  against  the  company. 

In  any  event,  the  automobile  seems  to  have  left  the  road- 


COLLISION  INSURANCE         ,  125 

bed,  as  it  skidded  on  the  roadway,  so  as  to  thrust  the  rear 
wheels  across  a  granitoid  guttering,  twenty  inches  wide, 
and  on  a  level  with,  and  adjacent  to  the  roadway,  and  thence 
across  a  grass  plot  adjoining,  two  feet  wide,  where  they 
collided  with  a  sidewalk,  six  inches  above  the  plot,  causing 
damage  to  the  automobile.  Stix  v.  Travelers  Indemnity  Co., 
(1913)  175  Mo.  App.  171,  157  S.  W.  870. 

§109.     Fall  of  Automobile  Into  Elevator  Shaft  Covered.— 

A  collision  rider  read  as  follows:  "In  consideration  of  $20, 
Additional  Premium,  this  policy  is  hereby  extended  to  cover 
damages  to  the  automobile  and  equipment  herein  insured 
caused  by  collision  with  any  other  vehicle  or  with  any  animal 
or  object,  or  any  obstacle  placed  as  a  barrier;  or  in  entering 
or  leaving  any  building  adjacent  to  any  roadway.  But 
nothing  in  this  clause  shall  be  held  as  making  this  company 
liable  for  damages  caused  by  striking  any  portion  of  the 
gutter,  roadbed  or  ditch,  or  by  striking  street  or  steam  rail- 
road rails  or  ties,  or  by  upset  unless  the  upset  be  caused  by 
such  a  collision  as  is  insured  against  hereunder;  or  for  loss 
or  damage  by  detention  or  loss  of  use." 

An  automobile  insured  under  the  foregoing  rider  was  being 
taken  by  the  chauffeur  into  a  garage  for  the  purpose  of 
having  some  repairs  made.  The  chauffeur  took  the  car 
inside  the  building  a  distance  of  thirty  to  thirty-five  feet 
from  the  entrance,  when  he  stopped  to  speak  to  the  foreman. 
The  car  was  closed  and  it  was  somewhat  dark.  Intending  to 
go  to  the  second  story,  he  backed  the  car  into  the  open  area 
of  an  elevator  shaft  and  the  car  fell  to  the  ground  below. 
The  insurance  company's  defense  to  an  action  on  the  policy 
was  that  the  accident  was  not  the  result  of  a  collision,  and  that 
it  occurred  inside  of  a  building.  It  was  held  that  there  was 
a  collision,  as  it  could  not  be  urged  that  when  a  body  is  hurled 
through  the  air  and  it  hits  the  earth  "striking"  is  not 
the  accepted  word  to  designate  the  contact,  and  "striking" 
was  the  defendant's  own  definition  of  the  word  "collision." 


126  AUTOMOBILE  INSURANCE  LAW 

Regarding  the  meaning  to  be  attributed  to  the  phrase  "on 
entering  or  leaving  any  building"  it  was  held  to  be  a  fair 
interpretation  of  the  rider  and  the  policy  that  the  insurer 
was  liable  for  striking  an  object  without  regard  to  the  place 
where  it  might  occur  and  it  was  liable  for  any  damage  to 
the  automobile  on  entering  or  leaving  the  building  from 
accidents  not  caused  by  collision. 

Should  there  be1  any  doubt  about  the  meaning  of  the 
language  of  the  rider,  the  court  would  interpret  it  most 
strongly  in  favor  of  the  insured  and  hold  the  insurer  liable. 
Wetherill  v.  Williamsburgh  City  Fire  Ins.  Co.,  (1915)  60 
Pennsylvania  Superior  Ct.  37. 

§110.  Fall  of  Floor  on  Automobile  Not  Covered. — A  policy 
insured  a  car  against  damage  by  collision  "with  any  other 
automobile,  vehicle  or  object,  excluding  *  *  *  damage  caused 
by  striking"  roabed,  rails  or  ties.  While  the  car  was  in  a 
garage,  the  second  floor  of  the  building  fell  upon  it.  It  was 
held  that  the  resulting  damage  was  not  caused  by  ''collision."" 
Such  a  construction  of  the  policy  would  be  a  forced  one  and 
clearly  not  within  the  intention  of  either  party  to  the  policy. 
O'Leary  v.  St.  Paul  Fire  and  Marine  Ins.  Co.,  (1917)  Tex. 
Civ.  App.  196  S.  W.  575. 

§111.     Fall  of  Steam  Shovel  on  Autotruck  Covered. — In  an 

action  by  the  seller  and  purchaser  in  a  conditional  sale  contract 
of  an  autotruck  against  an  insurance  company  on  a  policy 
in  which,  according  to  the  parties'  agreed  statement  of  facts, 
there  was  "full  coverage  collision"  insurance,  it  appeared 
that  the  truck  was  loaded  T^y  means  of  a  steam  shovel ;  that 
is,  by  a  scoop  connected  with  and  swinging  from  the  arm  of 
a  derrick.  The  scoop  was  filled  with  crushed  stone,  lifted  by 
the  derrick  arm,  swung  over  the  truck,  lowered  to  the 
proper  position,  and  opened  to  allow  the  stone  to  fall  into 
the  truck  body.  At  the  time  of  the  accident,  the  loaded  scoop, 
while  over  and  above  the  truck,  fell  from  some  unexplained 
reason  upon  the  truck,  causing  damage  to  the  truck  in  the 
agreed  sum  of  $483.45. 


COLLISION  INSURANCE  127 

As  stated  by  the  court  the  question  involved  was:  Did 
the  fact  that  the  truck  was  struck  by  an  object  coming  from 
above  it,  instead  of  on  a  level  with  it,  remove  the  accident 
from  the  field  of '"collision,"  and  relieve  the  defendant  from 
liability?  The  Michigan  Supreme  Court  answered  the  ques- 
tion in  the  negative,  saying  in  part: 

"Most  collisions  occur  in  the  violent  impact  of  two  bodies 
on  the  same  plane  or  level,  and  it  is  undoubtedly  true  that 
the  word  is  more  frequently  used  to  express  such  impacts 
than  other  violent  impacts.  But  we  doubt  that  this  fact  has 
given  to  the  word  such  a  common  understanding  of  its  mean- 
ing as  to  exclude  violent  impacts  unless  upon  the  same  plane 
or  level.  If  one  machine  was  going  up  and  another  going 
down  a  steep  hill,  and  they  came  violently  together,  no  one 
would  hesitate  for  a  moment  in  using  the  word  'collision', 
At  what  angle  must  the  impact  occur  to  make  the  use  of  the 
word  'collision'  inappropriate  and  relieve  the  insurance  com- 
pany from  liability?  We  are  persuaded  that  the  better  rule, 
the  safe  rule,  is  to  treat  and  consider  the  word  as  having  the 
meaning  given  it  uniformly  by  the  lexicographers ;  that  where 
there  is  a  striking  together,  a  violent  contact  or  meeting  of 
two  bodies,  there  is  a  collision  between  them,  and  that  the 
angle  from  which  the  impact  occurs  is  unimportant.  In  the 
instant  case  there  was  the  violent  striking  together  of  the 
truck  and  the  heavily  laden  scoop ;  this  was  a  collision  within 
the  meaning  of  the  policy  and  rendered  the  defendant  liable." 
Universal  Service  Co.  v.  American  Insurance  Co.  of  Newark, 
N.  J.  (1921)— Mich.— 181  N.  W.  1007.  The  court  adverted  to 
the  contrary  conclusion  reached  by  the  Wisconsin  Supreme 
Court  in  Bell  v.  American  Insurance  Co.,  (1921) — Wis. — 181 
N.  W.  733,  (see  supra  §107). 

§112.  Violation  of  Law  by  Insured. — Action  was  brought 
on  a  policy  which  covered  loss  by  collision  when  the  auto- 
mobile was  being  used  for  "pleasure  and  business  calls." 
The  car  was  destroyed  while  attempting  to  cross  railroad 
tracks  by  being  overturned  on  the  tracks  and  then  struck  by 


128  AUTOMOBILE  INSURANCE  LAW 

a  freight  train.  A"t  the  time  the  insured  was  carrying  through 
dry  territory  a  considerable  quantity  of  intoxicating  liquor, 
which  the  insurance  company  claimed  he  intended  to  dispose 
of  illegally  in  dry  territory;  but  though  the  circumstances 
were  suspicious,  there  was  no  direct  proof  of  this.  It  was 
held  that  the  use  the  plaintiff  was  making  of  his  machine 
was  within  the  terms  of  the  policy,  the  company  having 
chosen  no  more  definite  statement  of  the  use  in  which 
liability  should  accrue  for  injury  by  a  collision.  Cohen  v. 
Chicago  Bonding  &  Insurance  Co.,  (1920)— Minn.— 178  N.  W. 
485. 


CHAPTER  XIV 

Transportation  Insurance 

§113.    "Stranding  or  Sinking." 
§114.     "Derailment." 

§113.  "Stranding  or  Sinking." — A  policy  for  one  year  cov- 
ered loss  from  "stranding-  or  sinking  of  any  conveyance,  by 
land  or  water,  in  or  upon  which  such  automobile  is  being 
transported,"  provided  the  car  was  not  used  "beyond  the 
limits  of  the  United  States,  Canada  and  Mexico,  or  between 
ports  within  said  limits." 

The  automobile  was  damaged  from  being  submerged  in 
salt  water  as  the  result  of  the  sinking  of  a  ferry  upon  which 
the  insured  had  driven  it  for  transportation  across  Goose 
Creek,  in  Harris  County,  Tex.  In  an  action  on  the  policy 
one  of  the  defenses  was  that  the  policy  carried  an  implied 
warranty  on  the  part  of  the  insured  of  the  seaworthiness 
of  the  ferry  for  the  use  he  attempted  to  make  of  it,  which 
obligation  had  been  breached.  The  court  held  that  this 
defense  was  not  available,  because  not  applicable  to  the  kind 
of  insurance  here  involved,  and  that  the  ordinary  policy  of 
automobile  accident  insurance,  like  the  one  here  sued  upon, 
is  not  of  the  character  of  a  strictly  marine  insurance  policy. 
The  court  said :  "The  nature  of  the  risk  is  essentially  different 
from  that  applying  to  hazards  of  the  sea,  if  for  no  other 
reason,  in  that  the  subject  of  it,  the  automobile,  was  itself 
contemplated  to  be  used  as  a  means  of  conveyance,  in  refer- 
ence to  which  no  such  condition  as  seaworthiness,  or  the  lack 
of  it,  could  have  been  thought  of.  Consequently  the  inci- 
dents of  an  undertaking  to  provide  against  'the  perils  of  the 
sea',  or  other  hazards  to  which  a  seagoing  vessel  or  a  cargo 
carried  in  one,  may  become  subject,  do  not  attach.  The 

129 


130  AUTOMOBILE  INSURANCE  LAW 

parties  here  by  plain  stipulations  made  another  kind  'of 
contract."  American  Automobile  Insurance  Co.  v.  F^x  (Tex. 
Civ.  App.  1919)  218  S.  W.  92. 

It  is  the  sinking  of  the  ferry  or  other  conveyance,  not  of 
•the  car  itself,  which  is  insured  against. 

A  policy  over  an  automobile  contained  the  following  en- 
dorsement: "In  consideration  of  $28.05  premium  *  *  *  it  is 
hereby  understood  and  agreed  that  this  policy  is  extended 
to  cover  the  insured  to  an  amount  not  exceeding  $1,700  on 
the  body,  machinery  and  equipment  while  within  the  limits 
of  the  Dominion  of  Canada  and  the  United  States,  including 
while  in  building,  on  road,  on  railroad  car  or  other  convey- 
ance, ferry  or  inland  steamer,  or  coastwise  steamer  between 
ports  within  said  limits  subject  to  the  conditions  before  men- 
tioned and  as  follows :  (A)  Fire,  arising  from  any  cause  what- 
soever, and  lightning.  (B)  While  being  transported  in  any 
conveyance  by  land  or  water — stranding,  sinking,  collision 
burning  or  derailment  of  such  conveyance,  including  general 
average  and  salvage  charges  for  which  the  insured  is  equally 
liable.  (C)  Theft,  robbery  or  pilferage,  excepting  *  *  *." 

The  car  was  being  taken  from  the  mainland  to  an  island 
on  a  ferry  operated  by  a  chain.  When  the  ferry  reached  the 
island,  the  driver  was  told  it  was  all  right  to  go  ahead  and 
he  proceeded  to  drive  the  car  off  the  ferry.  After  the  front 
wheels  had  reached  the  land,  the  ferry  began  to  move  away, 
with  the  result  that  the  car  dropped  into  the  water.  The 
owner  sued  the  insurance  company  for  the  cost  of  raising  the 
car  and  of  the  repairs  and  new  parts.  It  was  held  that  the 
damage  was  not  covered  by  the  policy,  the  loss  not  having 
been  caused  by  the  stranding,  sinking  or  collision  or  burning 
of  the  ferry  boat. 

The  court  said:  "Clauses  (A)  (B)  and  (C)  are  intended,  in 
my  judgment,  to  define  the  three  kinds  of  risk  assumed  by 
the  insurers,  (A)  covering  fire,  that  is,  fire  destroying  or 
damaging  the  car  itself,  and  lightning;  (B)  covering  loss 
while  being  transported  in  any  conveyance  by  land  or  water  ; 
and  (C)  covering  'theft,'  'robbery,'  and  'pilferage.'  It  must 


TRANSPORTATION  INSURANCE  131 

be  observed  that  in  clauses  (A)  and  (C)  the  nature  of  the 
risk  is  definitely  described  by  nouns,  namely,  'fire,'  'lightning/ 
'theft,'  'robbery,'  and  'pilferage.'  The  corresponding  words  in 
clause  (B)  are  'stranding,'  'sinking,'  'collision,'  'burning',  and 
'derailment.'  And  the  risk  which  the  policy  assumes  is  the 
stranding,  sinking,  collision,  burning,  or  derailment  of  the 
conveyance  containing  the  motor-car  while  being  transported 
by  land  or  water.  It  is  not  the  stranding,  sinking,  etc.,  of  the 
motor  car  itself  which  is  covered,  but  of  the  conveyance ;  and 
any  damage  to  the  motor  car  resulting  from  any  such  accident 
to  the  conveyance  would  be  covered  by  the  policy.  The  open- 
ing words  of  the  clause  are  to  be  interpreted  solely  as  mark- 
ing the  occasion  upon  which  any  of  the  specified  accidents 
to  the  conveyance  will  entitle  the  insured  to  recover."  Wamp- 
ler  v.  British  Empire  Underwriters  Agency,  (1920)  54  Domin- 
ion L.  R.  657. 

§114.  "Derailment." — An  action  of  contract  was  brought 
upon  a  transportation  certificate  of  insurance,  on  the  margin 
of  which  was  printed :  "This  insurance  is  only  against  loss  or 
damage  by  fire,  collision  or  derailment  on  land,  and  marine 
perils  while  on  ferries  and  transfers."  In  the  body  of  the  cer- 
tificate the  following  appeared:  "Shipped  by  auto  truck  at  and 
from  Medford,  Mass.,  to  destination  East  Princeton,  Mass., 
covering  only 'while  in  transit  by  land." 

While  the  property  was  in  course  of  transportation  by  auto 
truck  the  wheels  of  the  truck  skidded  into  the  gutter,  caus- 
ing the  truck  to  tip  and  capsize.  The  amount  of  damage  for 
which  the  plaintiff  would  be  entitled  to  recover,  if  the  in- 
surance company  was  liable  at  all  under  the  certificate,  was 
agreed  upon  by  the  parties. 

As  the  accident  was  not  caused  by  fire  or  by  collision  the 
sole  question  presented  was  whether  the  damage  was  caused 
by  a  "derailment"  as  meant  by  the  certificate.  "Derailment"  is 
defined  by  Webster's  International  Dictionary  as  "the  act 
of  going  off,  or  the  state  of  being  off,  the  rails  of  a  railroad." 

It  was  held  that  the  word  was  to  be  interpreted  according 
to  the  general  and  ordinary  acceptation  of  the  language  used 


132  AUTOMOBILE  INSURANCE  LAW 

in  the  absence  of  evidence  that  it  has  acquired  by  custom  or 
otherwise  a  peculiar  meaning  distinct  from  the  popular  sense 
of  the  word.  It  is  to  be  understood  as  conveying  the  usual 
meaning  of  the  word  as  commonly  accepted.  It  is  plain  that 
"derailment"  is  used  only  in  connection  with  transportation 
by  rail  as  distinguished  from  transportation  by  vehicles  over 
land  by  means  other  than  by  rail,  and  as  distinguished  from 
transportation  by  water. 

It  was  held  that  the  language  of  the  certificate  was  clear 
and  free  from  ambiguity,  and  the  parties  must  be  bound  by 
the  agreement  which  they  had  entered  into,  in  the  absence  of 
fraud  or  some  other  legal  reason  justifying  a  repudiation  of 
the  contract.  The  skidding  of  the  hind  wheels  of  the  truck 
into  the  gutter,  causing  it  to  capsize  when  it  was  being  op- 
erated on  a  public  highway,  was  therefore  found  not  to  be 
"derailment,"  and  the  insurance  company  was  not  liable  under 
the  certificate.  Graham  v.  Insurance  Co.  of  North  America 
(1915)  220  Mass.  230,  107  N.  E.  915. 


CHAPTER  XV 

Indemnity  Insurance 

§115.  In  General. 

§116.  Right  to  Issue  Indemnity  Insurance. 

§117.  Criminal  Prosecutions   Not   Insured  Against. 

§118.  Use  of  Car  by  Another  Than  Owner  or  His  Servant. 

§119.  Use  of  Car  by  Member  of  Owner's  Family. 

§120.  Indemnity  Policies   Insuring  Partnerships. 

§121.  Indemnity  Policies  Insuring  Partners. 

§122.  Exception  of  Cars  Used  for  Demonstration. 

§123.  Violation   of   Statute   and   Provision   of   Policy  as   to   Age 

of  Driver. 

§124.  Violation  of  Speed  Ordinance. 

§125.  Violation  of  Statute  As  to  Registration. 

§126.  Actual     Payment     of     Loss     by     Insured;     Liability     or 

Indemnity. 

§127.  What  Constitutes  Payment  of  Judgment. 

§128.  Condition   as   to   Payment   Prohibited  by   Statute. 

§129.  Voluntary  Payment  by  Insured  Not  Actual  Payment. 

§130.  Right  of  Person   Injured  to  Sue   Insurance  Company. 

§131.  "Bodily    Injury"    as    Affecting    Third    Person's    Right    to 

Recover. 

§132.  Judgment   Against   Insured;   Garnishment. 

§133.  Aid  by  Insured  in  Defense  of  Negligence  Action. 

§134.  Settlements    by  Insured   Without   Insurer's    Consent. 

§135.  Effect  of  Insurer's  Refusal  to  Accede  to  Compromise. 

§136.  Interference    with    Negotiations. 

§137.  Interference  in  Suits. 

§138.  Waiver  by  Insurer  of  Defense  by  Assuming  Control  of  Suit. 

§139.  Effect   of   Insurer's   Failure  to  Appeal. 

§140.  Insurer  Cannot  be  Enjoined  from  Defending  Suit  Against 

Assured. 

§141.  Necessity  for  Notice  to  Insurer  of  Accident. 

§142.  Time  for  Notice  of  Accident. 

§143.  Waiver  of  Condition  as  to  Notice  of  Accident. 

§144.  Amount  of  Recovery. 

§145.  Same;  Bond  Premium  Not  Covered. 

§146.  Same;   Insured's  Costs  After   Insurer's   Failure  to  Defend 

Suit. 

§147.  Provision    Against    Waiver    of    Conditions    by    Company's 

Officers. 

§148.  Effect  of  Settlement  by  Insurer  on  Rights  of  Insured. 

§149.  Effect  of  References  to  Insurance  in  Negligence  Actions. 

§150.  Same;  Error  Cannot  be  Cured  by  Instruction  to  Jury. 

133 


134  AUTOMOBILE  INSURANCE  LAW 

§151.    Same;  Defendant  Cannot  Complain  if  Reference  First  Made 
by  Him. 

§115.  In  General. — An  automobile  indemnity  policy,  as 
usually  framed,  has  been  described  as  a  contract  where,  being 
properly  notified  of  an  accident  or  damage  covered  by  the 
policy,  the  insurance  company  agrees  to  step  into  the  insured's 
shoes  as  far  as  handling  the  claim  or  effecting  settlement  or 
defending  suits  is  concerned.  Burnham  v.  Williams  and  Quinn 
(1917)  198  Mo.  App.  18,  194  S.  W.  751. 

An  incorporated  association  whose  business  is  that  of  in- 
demnifying its  members  against  loss  resulting  from  damages 
inflicted  by  automobiles  upon  the  person  or  property  of 
others  is  an  insurance  company,  and  by  virtue  of  the  pro- 
visions of  section  51  of  the  Kansas  Civil  Code  an  action  on 
the  contract  of  indemnity  may  be  brought  in  the  county  in 
which  the  plaintiff  resides.  Emerson  v.  Western  Automobile 
Indemnity  Assn,  (1919)  105  Kan.  242,  182  Pac.  647. 

§116.  Right  to  Issue  Indemnity  Insurance. — Indemnity  or 
liability  insurance  differing  widely  from  accident  or  property 
insurance,  the  question  has  arisen  in  various  states  as  to  the 
right,  under  the  state  statutes,  to  issue  such  insurance  under 
the  existing  state  statutes  relating  to  automobile  insurance. 
American  Fidelity  Co.  v.  Bleakley  (1912)  157  Iowa  442,  138 
N.  W.  598. 

So,  in  Michigan,  it  has  been  held  that  a  statute  which 
authorizes,  under  the  heading  "Fire  Insurance  Act,"  com- 
panies "to  make  insurance  on  automobiles  whether  stationary 
or  being  operated  under  their  own  power,  against  any  hazard" 
does  not  authorize  a  company  to  write  liability  insurance,  a 
contract  of  this  kind  being  something  more  than  "simply 
the  placing  of  insurance  on  an  automobile."  American  Auto- 
mobile Insurance  Co.  v.  Commissioner  of  Insurance  (1913) 
174  Mich.  295,  140  N.  W.  557.  The  court  said :  "The  language 
of  the  statute  is  not  complex.  Authority  is  given  to  'make 
insurance  on  automobiles.'  If  it  was  an  insurance  on  the 
automobile  against  fire,  that  would  be  a  recognized  hazard 
to  which  automobiles  are  subject.  If  it  was  an  insurance  on 


INDEMNITY  INSURANCE  135 

the  automobile  against  theft,  that,  too,  would  be  a  recognized 
hazard  to  which  the  automobile  is  subject.  So  of  injury  by 
accident,  and  the  liability  in  each  case  would  not  be  greater 
than  the  value  of  the  automobile.  Is  not  the  relator  doing 
more  than  placing  insurance  on  automobiles?" 

And  it  has  been  held  in  Iowa  that  a  foreign  insurance  com- 
pany, which  has  complied  with  all  the  provisions  of  the 
statutes  of  Iowa  relative  to  its  admission  to  that  state,  and 
has  received  a  license  from  the  state  auditor  to  do  business 
within  the  state,  and  which  has  power  by  the  laws  of  its  own 
state  and  by  its  charter  to  insure  the  owner  or  driver  of  an 
automobile,  who  is  not  an  employer,  against  liability  for 
damages  to  persons  resulting  from  an  accident  caused  by  the 
owner's  'or  driver's  negligence  in  operating  his  machine 
could  not  issue  such  insurance  in  Iowa  under  the  statutory 
provision  authorizing  insurance  of  the  health  of  persons  "and 
against  personal  injuries,  disablement  or  death  resulting  from 
traveling  or  general  accidents  by  land  or  water,"  or  the  pro- 
vision authorizing  employers'  liability  insurance.  American 
Fidelity  Co.  v.  Bleakley  (1912)  157  Iowa  442,  138  N.  W.  508. 

The  courts  have  no  authority  to  override  such  legislation 
on  the  ground  of  comity  between  the  states,  since,  within 
its  power,  the  state,  through  its  legislation,  is  'supreme. 
American  Fidelity  Co.  v.  Bleakley  (1912)  157  Iowa  442,  138 
N.  W  508.  Since  the  policy  of  the  state  of  Michigan,  as  evi- 
denced by  statutes  and  decisions,  is  to  separate  insurance  on 
property  from  other  lines,  the  Michigan  Supreme  Court  holds 
that  the  rule  of  comity,  permitting  a  corporation  organized 
under  the  laws  of  another  state,  which  authorize  it  to  trans- 
act liability  and  other  insurance  on  automobiles,  to  engage 
in  similar  business  in  other  states,  does  not  empower  it  to 
engage  in  such  distinct  lines  of  business  not  permitted  by  the 
Michigan  statutes.  American  Automobile  Insurance  Co.  v. 
Commissioner  of  Insurance  (1913)  174  Mich.  295,  140  N.  W. 
557. 

§117.     Criminal   Prosecutions   Not   Insured   Against. — The 

word   "suit"   in   an   indemnity   policy   does   not   comprehend 


136  AUTOMOBILE  INSURANCE  LAW 

criminal  prosecutions.  A  provision  in  such  a  policy  against 
loss  from  the  liability  imposed  by  law  upon  the  insured  on 
account  of  bodily  injuries  caused  by  the  use  of  the  auto- 
mobiles specified  in  the  policy  that  the  insurer  shall  defend 
any  suits  brought  against  the  insured  on  account  of  such 
injuries  does  not  cover  a  prosecution  for  manslaughter  arising 
out  of  the  negligent  operation  of  the  car.  Patterson  v. 
Standard  Accident  Ins.  Co.  (1913)  178  Mich.  288,  144  N.  W. 
491,  51.  L.  R.  A.  (N.  S.)  583,  Ann.  Cas.  1915  A  632.  The  court 
said:  "It  would  be  a  forced  and  unnatural  construction  to 
hold  that  the  word  as  used  in  this  accident  policy  is  intended 
to  comprehend  criminal  prosecutions  instituted  and  conducted 
by  public  officials  in  the  name  of  the  people,  presumably  for 
the  punishment  and  suppression  of  crime  *  *  *.  Further- 
more, the  two  essentials  of  a  contract  of  insurance  which  are 
to  be  ,  considered  together  in  this  inquiry  are  the  subject 
matter  and  the  risk  insured  against.  The  two  automobiles 
constitute  the  subject-matter  in  relation  to  which  the  risk 
was  assumed.  Construing  the  various  provisions  of  the  policy 
together,  we  think  it  clearly  evident  that  the  controlling 
thought  as  to  indemnity,  the  thing  contracted  for,  was  pro- 
tection against  risk  of  liability  for  injury  resulting  from 
accidents  in  the  operation  of  the  automobiles,  not  risk  of 
public  prosecution  for  crimes  or  misdemeanors  committed  in 
the  use  of  them;  and  we  .conclude  from  the  context  that  in 
this  policy  the  word  'suits'  must  be  taken  to  mean  civil  suits 
which  would  determine  the  pecuniary  liability  of  defendant 
for  injury  to  person  or  property;  suits  which,  because  of  its 
promised  indemnity,  defendant  was  necesarily  interested  in 
defending." 

§118.    Use  of  Car  by  Another  Than  Owner  or  His  Servant. 

— In  a  New  York  case  it  was  held  that  where  the  plaintiff  was 
insured  against  loss  "by  reason  of  the  ownership,  main- 
tenance or  use  of"  the  automobile,  he  would  require  to  show, 
in  order  to  recover,  that  the  chauffeur  who  drove  the  auto- 
mobile at  the  time  of  the  accident  was  his  servant  and  en- 
gaged in  his  business,  especially  in  view  of  the  insured's 


INDEMNITY  INSURANCE  137 

answer  in  the  injured  person's  action  -denying  that  such 
chauffeur  was  the  insured's  servant  and  engaged  in  his  busi- 
ness. All  that  appeared  at  the  trial  on  this  question  was  that 
the  truck,  which  was  used  by  the  insured  for  delivery  pur- 
poses, had  been  put  into  storage  with  a  garage  company,  with 
liberty  to  rent  it,  and  the  garage  company  had  sent  it  out,  in 
charge  of  a  chauffeur  hired  by  it,  to  deliver  for  another  com- 
pany. This  was  held  insufficient  to  bring  the  claim  within 
the  terms  of  the  policy.  Mayor,  Lane  &  Co.  v.  Commercial 
Casualty  Co.  (1915)  169  App.  Div.  772,  155  N.  Y.  Supp.  75. 

§119.     Use   of   Car   by    Member    of   Owner's    Family. — A 

policy  indemnifying  the  insured  against  claims  for  damages 
on  account  of  bodily  injury  "accidentally  suffered  or  alleged 
to  have  been  suffered  *  *  *  by  any  person  or  persons  by  rea- 
son of  the  ownership,  maintenance  or  use"  of  a  described 
automobile,  was  held,  in  an  Iowa  case,  not  to  limit  the  in- 
demnity to  claims  for  damages  on  account  of  injuries  oc- 
curring while  the  insured  is  personally  using  the  car,  but 
to  extend  to  an  adult  son,  who  was  a  member  of  the  family, 
where  it  was  known  and  understood  byt  the  company  that  the 
insured  did  not  himself  drive  the  car,  and  a  clause  in  the 
policy  exempting  the  insurer  from 'liability  for  injuries  when 
the  car  was  being  driven  by  anyone  under  sixteen  years  of 
age  showed  that  the  car  was  intended  to  be  used  as  a  family 
car.  Fullerton  v.  United  States  Casualty  Co.,  (1918)  184 
Iowa  219,  167  N.  W.  700. 

§120.  Indemnity  Policies  Insuring  Partnerships. — An  in- 
demnity policy  insured  Hartigan  &  Dwyer,  a  copartnership, 
composed  of  Maurice  H.  Hartigan  and  Joseph  E.  Dwyer, 
against  loss  by  accidents  caused  by  a  described  delivery  auto- 
hobile.  While  the  automobile  was  being  used  in  the  business 
of  another  copartnership,  Hartigan,  Dwyer  &  O'Brien,  con- 
sisting of  the  same  individuals  as  the  firm  of  Hartigan  & 
Dwyer  and  one  John  J.  O'Brien,  and  driven  by  an  employee 
of  Hartigan,  Dwyer  &  O'Brien,  a  child  was  run  over  and 
killed.  Hartigan  &  Dwyer  paid  two-thirds  of  the  amount 


138  AUTOMOBILE  INSURANCE  LAW 

for  which  the  claim  against  Hartigan,  Dwyer  &  O'Brien 
arising  out  of  the  accident  was  settled  and  maintained  suc- 
cessfully an  action  on  the  policy  to  recover  the  amount  thus 
paid  by  them.  On  appeal,  the  question  was  whether  the 
policy  could  be  so  construed  as  to  bring  within  its  terms 
such  individual  liability.  The  plaintiffs  directed  the  court's 
attention  to  the  trial  court's  findings  of  fact,  unanimously 
affirmed  by  the  Appellate  Division,  that  the  policy  insured 
the  plaintiffs  "and  each  of  them"  and  that  at  the  time  of  the 
accident  the  automobile  was  in  use  "by  an  agent  of  the 
plaintiffs  and  one  John  J.  O'Brien."  The  New  York  Court 
of  Appeals  held  that  the  terms  of  the  policy  were  unambiguous 
and  limited  the  liability  of  the  insurer  to  accidents  which 
happened  while  the  automobile  was  being  used  on  the  firm 
business  of  Hartigan  &  Dwyer. 

The  plaintiffs  succeeded  in  the  lower  courts  on  the  theory 
that  they  were  individually  liable  for  the  torts  of  the  firm  of 
Hartigan,  Dwyer  &  O'Brien,  but  the  Court  of  Appeals  held 
that  it  was  the  firm  of  Hartigan  &  Dwyer,  described  in  the 
policy  as  "department  store  merchant,"  that  was  insured,  and 
that  firm  had  committed  no  wrong  and  incurred  no  liability. 
Hartigan  and  Dwyer,  as  individual  members  of  the  firm  of 
Hartigan,  Dwyer  &  O'Brien,  were  not  insured  against  liability 
for  the  acts  of  that  firm.  When  a  partnership  is  established, 
the  liability  of  the  individual  partners  is  an  incident  of  the 
partnership,  merely,  not  a  separate  and  independent  liability. 
The  policy  protected  Hartigan  &  Dwyer  from  loss  by  reason 
of  automobile1  accidents  for  which  their  partnership  was  liable 
and  to  that  extent  protected  them  individually  as  members  of 
such  firm ;  but  the  one  partnership  as  such  was  not  a  member 
of  and  was  not  liable  for  the  torts  of  the  other  partnership. 
Hartigan  v.  Casualty  Co.  of  America  (1919)  227  N.  Y.  175, 
124  N.  E.  789,  reversing  165  N.  Y.  Supp.  894,  which  affirmed 
161  N.  Y.  Supp.  145.  The  court  distinguished  this  case  from 
cases  where  the  partnership  was  suing  to  recover  for  the 
loss  one  of  its  partners  sustained  and  where  a  corporation  was 
suing  to  recover  the  loss  one  of  its  stockholders  sustained, 


INDEMNITY  INSURANCE  139 

because,  while  a  partner  is  individually  liable  for  the  debts  of 
his  firm,  a  partnership  is  not  liable  for  the  debts  of  the  indi- 
viduals who  compose  it,  neither  is  a  corporation  liable  for  the 
debts  of  its  shareholders.  (See  Kelly  v.  London  Guarantee 
&  Accident  Co.,  97  Mo.  App.  623,  71  S.  W.  711  and  Rock 
Springs  Distilling  Co.  v.  Employers'  Indemnity  Co.  of  Phila- 
delphia, 160  Ky.  317,  169  S.  W.  730.) 

8121.     Indemnity  Policies  Insuring  Partners. — Action  was 

brought  by  Frank  Steinfield  against  the  Massachusetts  Bond- 
ing &  Insurance  Company  on  an  indemnity  policy  against 
loss  imposed  on  the  insured  Steinfield  by  law  "by  reason  of 
the  ownership,  maintenance  or  use"  of  his  automobile.  The 
plaintiff  was  a  partner  in  the  firm  of  B.  Steinfield's  Sons,  and 
used  the  machine  in  the  partnership  business.  One  of  the 
partners,  while  driving  the  machine,  ran  into  one  Dean,  who 
recovered  a  judgment  against  the  firm,  which  the  firm  satis- 
fied. 

It  was  held  that  the  question  whether  the  insurance  com- 
pany was  liable  for  the  Dean  judgment  did  not  depend  on 
whether  the  plaintiff  insured  was  using  the  machine  on  his 
own  business  when  the  accident  happened,  but  on  whether 
the  law  made  him  liable  for  Dean's  loss.  A  partner  being 
liable  individually  for  the  debts  of  his  firm,  the  plaintiff  was 
therefore  legally  liable  for  the  judgment  against  the  firm,  so 
that  the  loss  sustained  by  the  plaintiff  was  covered  by  the 
policy.  But  as  the  firm  of  B.  Steinfield's  Sons  paid  the  judg- 
ment and  the  expenses  of  defending  the  suit  against  it,  the 
plaintiff  insured  could  only  recover  in  his  suit  against  the 
insurance  company  the  amount  with  which  he  would  be 
charged  because  of  the  Dean  suit  on  an  accounting;  and  if 
he  should  succeed  in  his  suit  against  the  insurance  company 
and  the  company  should  satisfy  the  judgment  against  it, 
the  insurance  company  would  be  subrogated  to  his  rights  to 
proceed  against  the  one  who  drove  the  machine.  If  the 
plaintiff,  and  not  B.  Steinfield's  Sons,  had  paid  the  Dean 
judgment  and  the  expenses  incident  to  the  suit,  he  could 


140 

recover  the  amount  so  paid  from  the  insurance  company, 
which  could  maintain  an  action  under  the  subrogation  clause 
of  the  policy  for  an  accounting  against  the  members  of  B. 
Steinfield's  Sons,  or  against  the  one  who  was  driving  the 
machine,  if,  as  between  the  partners,  he  was  liable  for  the  loss 
the  firm  sustained  by  the  Dean  suit.  Steinfield  v.  Massachu- 
setts Bonding  &  Ins.  Co.  (1920)— N.  H.— Ill  Atl.  303. 

§122.     Exception  of  Cars  Used  for  Demonstration. — In  an 

action  on  an  automobile  indemnity  policy  the  defense  was 
based  on  the  following  clause  in  the  policy:  "Condition  A. 
This  policy  does  not  cover  loss  *  *  *  by  reason  of  the  use  or 
maintenance  of  any  of  the  automobiles  enumerated  under 
any  of  the  following  conditions  *  *  *  5,  while  used  for 
demonstrating  or  testing."  It  was  admitted  that  the  acci- 
dent happened  ( as  described  by  the  plaintiff's  chauffeur,  who 
testified  that  "after  taking  the  owner  for  a  drive,  he  re- 
turned to  the  hotel.  I  made  a  slight  adjustment  of  the 
carburetor  and  took  the  car  out  to  see  what  effect  it  had  on 
the  running  of  the  motor,  and  in  going  around  a  turn  the 
accident  occurred." 

It  was  held  that  it  was  a  question  for  the  jury  whether, 
under  the  circumstances,  the  use  of  the  automobile  at  the 
time  the  damage  was  done  constituted  such  a  demonstra- 
tion or  test  as  was  contemplated  by  the  condition  mentioned. 
The  terms  used  were  considered  not  so  self-explanatory,  or  so 
well  understood  by  the  general  public,  that  it  could  be  held 
as  a  matter  of  law  that  adjusting  the  carburetor  and  ascer- 
taining the  result  of  that  adjustment  by  the  owner's  chauf- 
feur, when  he  returned  the  car  to  the  barn  after  an  ordinary 
family  drive,  constituted  "demonstration  and  testing"  as  used 
in  the  policy.  The  testimony  submitted  by  the  experts  was 
contradictory,  and  each  party  claimed  that  the  admitted  facts 
did  or  did  not  constitute  a  demonstration  or  test.  This  con- 
flict, it  was  held,  but  emphasized  the  judge's  duty  to  fairly 
submit  this  fact  to  the  jury.  Kunkle  v.  Union  Casualty  Co.. 
(1916)  62  Pa.  Superior  Ct,  114,  In  this  case  the  court  said; 


INDEMNITY  INSURANCE  141 

"Automobile  insurance  is  a  new  business,  and  deals  with 
methods  and  complicated  machinery  of  recent  introduction ; 
the  several  parts  and  the  operation  of  the  automobile  have 
given  to  us  many  new  words  of  indefinite  meaning-,  and  it 
is  often  necessary  to  rely  on  the  mechanicians  and  trade  ex- 
perts to  reasonably  understand  them,  and,  as  in  this  case, 
the  selected  experts  often  differ  in  the  meaning  to  be  given 
to  words  that  in  other  business  affairs  seem  to  have  a  clear 
and  precise  significance.  This  dispute  was  purely  one  of  fact, 
and  experts,  who  claimed  technical  and  peculiar  knowledge  on 
the  subject,  were  called  by  each  party  to  give  their  opinions 
as  to  the  business  or  trade  meaning  of  the  words — demonstra- 
tion and  testing.  It  is  true  that  words,  if  of  common  use, 
are  to  be  taken  in  their  natural,  plain,  obvious  and  ordinary 
significations;  but  if  technical  words  are  used,  they  are  to 
be  taken  in  their  special  or  technical  sense,  unless  a  contrary 
intention  clearly  appears  in  either  case  from  the  context." 

§123.     Violation  of  Statute  and  Provision  of  Policy  as  to 

Age  of  Driver. — Indemnity  policies  usually  contain  a  stipula- 
tion that  the  company  will  not  be  liable  if  the  automobile, 
at  the  time  of  an  injury,  is  driven  or  manipulated  by  any  one 
under  the  statutory  age  limit,  or  under  a  specified  age  in  any 
event.  Such  provisions  are  valid  and  will  be  given  effect  to. 
The  questions  arising  regarding  the  clause  are  mainly  ques- 
tions of  fact,  as  to  whether  the  automobile  was,  or  was  not, 
at  the  time  of  the  injury,  being  "driven  or  manipulated"  in 
violation  of  the  clause  or  of  the  statute. 

A  liability  policy  contained  a  clause  reading:  "This  policy 
does  not  cover  in  respect  of  any  automobile  while  driven  or 
manipulated  by  any  person  contrary  to  the  statutory  age 
limit  of  any  state  or  under  the  age  of  sixteen  years  where 
there  is  no  age  limit."  The  Minnesota  statute  prohibits  the 
issuing  of  a  license  to  a  person  under  18,  but  does  not  pro- 
hibit anyone  under  18  from  driving  an  automobile  as  a  hired 
chauffeur.  An  employee  of  the  insured,  over  16  but  under  18, 
obtained  a  license,  and,  while  operating  the  car,  injured  in 


142  AUTOMOBILE  INSURANCE  LAW 

a  collision  an  occupant  of  another  automobile,  who  obtained 
a  judgment  against  the  insured.  In  an  action  on  the  policy 
it  was  held  that  the  language  of  the  exception  is  not  clear. 
It  may  be  construed  to  mean  only  that  the  insured  will  not 
be  protected  if  his  automobile  is  driven  by  a  person  who  is 
either  under  16  or  under  such  age  as  the  statute  fixes  as  the 
minimum.  Under  that  construction  the  company  was  liable. 
The  construction  for  which  the  company  contended  was  that 
there  is  no  liability  if  the  insured's  automobile  was  driven  by 
a  person  under  the  minimum  age  fixed  by  statute  for  licensed 
chauffeurs,  viz.,  18  years.  It  was  held  that  under  the  lan- 
guage of  the  Minnesota  statute  the  company  was  liable,  a 
prior  statutory  provision  prohibiting  a  person  under  18  from 
driving  as  a  chauffeur  having  been  either  intentionally  or  in- 
advertently dropped  from  the  statute  in  1915.  Mannheimer 
Bros.  v.  Kansas  Casualty  &  Surety  Co.,  (1920)— Minn.— 180 
N.  W.  229. 

A  provision  of  a  policy  that  the  insurance  company  should 
not  be  liable  for  accidents  if  the  automobile,  at  the  time  of 
accident,  was  being  driven  by  a  person  in  violation  of  law  as 
to  age,  was  held  sufficient  to  protect  the  company  against 
liability  where  the  automobile  was  being  driven  by  a  16  year 
old  son  of  the  insured  in  violation  of  a  city  ordinance  making 
it  unlawful  for  any  person  under  18  years  of  age  to  drive 
an  automobile  within  the  city  limits,  if  the  ordinance  was  valid 
in  fact,  but  not  if  it  was  invalid.  Royal  Indemnity  Co.  v. 
Schwartz,  (1915)— Tex.  Civ.  App.— 172  S.  W.  581. 

A  policy  which  indemnified  the  insured  against  damages 
for  personal  injuries  caused  by  his  automobile  expressly  pro- 
vided that  the  insurer  should  not  be  liable  "in  respect  of  in- 
juries caused  in  whole  or  in  part  by  an  automobile  while  being 
driven  or  manipulated  by  any  person  in  violation  of  law  as 
to  age."  The  New  York  Appellate  Division  holds  that  there 
can  be  no  recovery  under  such  a  policy  on  a  judgment  re- 
covered against  the  insured  for  personal  injuries,  where  it 
appears  that  there  was  a  violation  of  subdivision  2  of  section 
282  of  the  New  York  Highway  law,  the  car  at  the  time  of 


INDEMNITY  INSURANCE  143 

the  injury  having  been  driven  by  the  insured's  son,  who  was 
under  18  years  of  age  and  was  not  accompanied  by  a  duly 
licensed  operator  or  by  the  owner  of  the  car,  as  required  by 
the  statute.  Morrison  v.  Royal  Indemnity  Co.  (1917)  180 
App.  Div.  709,  167  N.  Y.  Supp.  731. 

A  policy  indemnifying  the  car  owner  against  loss  for  bodily 
injuries  accidentally  inflicted  upon  others  provided  that  the 
company  should  not  be  liable  while  the  automobile  was  being 
driven  by  any  person  "under  the  age  fixed  by  law"  or  under 
the  age  of  16  in  any  event.  It  was  held  that  this  clause  had 
reference  solely  and  exclusively  to  the  minimum  age  (not  less 
than  sixteen)  at  which  one  might  lawfully  drive  a  motor 
vehicle ;  and  the  company  could  not  escape  liability  for  a  loss 
sustained  while  the  car  was  driven  by  an  unlicensed  person 
over  16,  merely  because  of  the  non-observance  of  the 
statutory  requirement  that  a  licensed  operator  should  accom- 
pany the  unlicensed  driver — a  requirement  which  had  no 
relevancy  to  the  age  of  the  driver.  Brock  v.  Travelers  In- 
surance Co.  (1914)  88  Conn.  308,  91  Atl.  279. 
An  indemnity  policy  contained  the  following  clause: 
"This  policy  does  not  cover  loss  from  liability  for,  or  any 
suit  based  on,  injuries  or  death  caused  by  any  automobile 
while  driven  or  manipulated  by  any  person  under  the  age 
fixed  by  law  or  under  the  age  of  sixteen  years  in  any  event." 
In  an  action  on  the  policy,  the  question  was  whether,  under 
the  circumstances,  the  automobile  was,  at  the  time  of  the 
accident,  "driven  or  manipulated"  by  the  insured  or  his 
son,  who  was  less  than  sixteen  years  of  age.  It  ap- 
peared that,  while  the  automobile  was  being  driven  by 
the  son,  the  father  "suddenly  leaned  over  to  the  left  and  took 
the  wheel  from  his  son,  telling  him  to  get  out  of  the  way," 
that  "the  son  shrunk  back  in  the  seat  ,and  the  father  there- 
after guided  the  course  of  the  automobile  and  entirely  con- 
trolled its  operation  so  far  as  possible  to  do  so  in  the  position 
in  which  he  was,  and  the  son  thereafter  did  nothing  except 
to  blow  the  horn,"  that  under  these  conditions  the  automobile 
crossed  parallel  street  railway  tracks,  passed  in  front  of  a 


144  AUTOMOBILE  INSURANCE  LAW 

street  railway  car  and  then  proceeded  between  the  street 
car  and  the  sidewalk,  and  ran  into  the  plaintiff,  who 
was  standing  on  the  street  for  the  purpose  of  taking 
the  car.  It  was  held  that  a  finding  was  warranted  that  at  the 
time  of  the  plaintiff's  injury  the  automobile  was  "driven  or 
manipulated,"  within  the  meaning  of  the  policy,  by  the  in- 
sured. Williams  v.  Nelson  ,(1917)  228  Mass.  191,  117  N.  E.  189. 

The  violation  of  the  statute  must,  it  appears,  have  some 
causative  connection  with  the  accident.  While  a  policy  agree- 
ing to  indemnify  an  insured  against  damages  resulting  to  him 
because  of  his  violation  of  a  criminal  statute  is  illegal  and 
void,  an  indemnity  policy  agreeing  to  indemnify  the  insured 
against  loss  by  reason  of  the  operation  of  an  automobile  is 
founded  on  a  good  and  valid  consideration  and  is  not,  it  is  held, 
made  void  by  an  incidental  violation  of  a  statute  prohibiting 
the  operation  of  an  automobile  by  an  infant.  So  recovery  was 
had  under  an  indemnity  policy,  although  the  car  was  being 
operated  in  violation  of  the  statute  by  a  boy  under  18  years 
of  age,  where  no  causative  connection  was  alleged  in  the 
insurance  company's  answer  between  the  operation  of  the  car 
by  the  infant  and  the  happening  of  the  accident.  Messersmith 
v.  American  Fidelity  Co.  (1919)  187  N.  Y.  App.  Div.  35,  175 
N.  Y.  Supp.  169,  reversing  167  N,  Y.  Supp.  579. 

The  court  said:  "For  all  that  appears  here,  the  boy  driving 
the  car  may  have  been  a  most  skillful  driver,  and  the  injury 
may  have  been  entirely  without  fault  on  his  part.  The  viola- 
tion of  the  statute  may  not  have  had  anything  whatever  to  do 
with  the  accident.  If  the  violation  of  the  statute  can,  under 
any  circumstances,  be  a  good  defense  to  the  policy  in  question, 
it  cannot  be  under  the  answer  as  drawn,  because  it  does  not 
allege  a  causative  connection  between  the  violation  of  the 
statute  and  the  accident." 

§124.  Violation  of  Speed  Ordinance. — A  policy  indemnify- 
ing a  taxicab  company  for  accidents  to  persons  caused  by  its 
taxicabs  is  broad  enough  to  cover  a  loss  sustained  by  the  in- 
sured from  an  accident  arising  from  violation  of  a  speed 


INDEMNITY  INSURANCE  145 

ordinance  by  one  of  its  drivers,  in  the  absence  of  a  clause 
excepting  such  a  risk.  Taxicab  Motor  Co.  v.  Pacific  Coast 
Casualty  Co.,  (1913)  73  Wash.  631,  132  Pac.  393.  A  policy 
indemnifying  the  owner  of  taxicabs  against  consequences  aris- 
ing from  wilful  violations  of  a  statute  by  the  insured  himself, 
would  be  void  as  against  public  policy,  but  such  an  owner 
may  be  lawfully  insured  against  the  consequences  of  such  vio- 
lations by  his  servants  and  employees,  if  such  acts  are  not 
directed  by  or  participated  in  by  the  insured. 

§125.  Violation  of  Statute  as  to  Registration. — It  would 
seem  that  under  a  policy  of  indemnity  the  insurance  company 
could  not  escape  liability  upon  the  ground  that  the  insured  was 
operating  his  automobile  in  violation  of  law  because  he  had 
not  had  it  registered.  Messersmith  v.  American  Fidelity 
Co.,  (1919)  187  N.  Y.  App.  Div.  35,  175  N.  Y.  Supp.  169,  re- 
versing 101  Misc.  (N.  Y.)  598,  167  N.  Y.  Supp.  579. 

§126.  Actual  Payment  of  Loss  by  Insured;  Liability  or  In- 
demnity.— A  provision  of  the  policy  making  the  company 
liable  only  after  payment  by  the  insured  of  the  loss,  after 
actual  trial  of  the  issue,  is  valid.  This  clause  distinguishes  the 
policy  as  one  insuring  against  loss  and  not  against  liability.  A 
judgment  for  the  amount  alone,  without  payment,  will  not, 
ordinarily,  make  the  company  liable. 

A  by-law  of  an  automobile  insurance  association  read  as 
follows :  "No  action  shall  lie  against  this  association  to  re- 
cover for  any  loss  sustained  by  a  member  unless  it  shall  be 
brought  by  any  such  member  for  loss  or  expense  actually  paid 
in  money  by  him,  after  actual  trial  of  the  issue,  nor  unless 
such  action  is  brought  within  eighteen  months  after  payment 
of  such  loss  or  expense."  It  was  held,  in  an  action  against 
the  association  for  the  amount  of  a  judgment  recovered 
against  a  member,  but  which  had  not  been  paid,  the  mem- 
ber having  become  bankrupt,  that  payment  in  money  by  a 
policy  holder  of  his  loss  and  expense,  after  trial  of  the  issue 
was  a  condition  precedent  to  action  on  his  policy,  notwith- 
standing a  provision  of  another  by-law  that  the  association 


146  AUTOMOBILE  INSURANCE  LAW 

would,  at  its  own  cost,  defend  suits  for  damages  against  mem- 
bers ;  and  the  condition  was  not  waived  or  forfeited  by  the 
company's  defending  the  action  in  which  the  issue  was  tried, 
pursuant  to  the  by-law  casting  the  defense  upon  the  insurer. 
Emerson  v.  Western  Automobile  Indemnity  Assn.,  (1919)  105 
Kan.  242,  182  Pac.  647.  The  court  said:  "After  accident, 
an  automobile  owner  is  not  grievously  concerned  about  either 
legal  liability  or  expenses,  so  long  as  an  insurance  company 
must  pay  the  bills.  To  protect  itself  against  indifference,  im- 
providence, and  even  collusion  and  downright  fraud,  the  in- 
surer is  obliged  to  undertake  defense  and  make  its  own  out- 
lays for  expenses.  Under  these  circumstances,  the  insurer  is 
not  put  to  any  election  to  forego  these  protective  measures,  or 
give  up  writing  indemnity  policies.  Until  the  state  interferes, 
an  indemnity  policy  may  lawfully  be  written  which  permits 
the  insurer  to  guard  against  rendition  of  a  judgment  when 
there  was  no  liability,  and  against  rendition  of  a  collusive  or 
unjust  judgment  when  there  was  liability.  An  automobile 
owner  may  take  or  leave  such  a  policy ;  but  when  such  a  con- 
tract has  been  made,  the  insurer  is  not  required  to  give  up 
one  feature  in  order  to  enjoy  the  benefit  of  the  other." 

But  if  the  insurer,  by  wrongful  conduct,  unjustifiably  pre- 
vent payment  of  loss  in  money  after  trial  of  the  issue,  it  will 
be  precluded  from  asserting,  in  an  action  on  the  policy,  that 
the  policy  did  not  mature  by  reason  of  non-payment.  And 
in  such  an  action,  certainty  that  payment  would  have  been 
made  if  the  insurer  had  not  meddled,  is  not  essential  to 
estoppel.  Reasonable  assurance,  under  all  the  circumstances, 
that  payment  would  have  been  made  is  sufficient.  Emerson 
v.  Western  Automobile  Indemnity  Assn,  (1919)  105  Kan. 
242,  182  Pac.  647. 

It  is  held  that  under  a  condition  providing  that  no  action 
shall  lie  against  the  insurance  company  to  recover  for  any 
loss  unless  brought  by  the  insured  for  loss  actually  sustained 
and  paid  by  him  in  money  in  satisfaction  of  a  judgment  after 
trial  of  the  issues,  and  that  no  action  shall  lie  to  recover  under 
any  other  agreement  of  the  company  therein  contained 


INDEMNITY  INSURANCE  147 

unless  brought  by  the  assured  himself  to  recover  money 
actually  expended  by  him,  no  right  of  action  accrues  to  the 
insured  where  a  judgment  has  been  recovered  against  him 
for  personal  injuries  sustained  by  a  third  person  through  the 
insured's  alleged  negligence  unless  he  has  actually  paid  the 
judgment.  It  follows  that  interest  should  not  be  charged 
prior  to  such  payment.  McClung  v.  Pennsylvania  Taximeter 
Cab  Co.  (1916)  25  Pa.  Dist.  Ct.  583. 

§127.     What    Constitutes    Payment    of    Judgment.  —  The 

payment  of  a  judgment  by  a  promissory  note  for  its  amount 
satisfies  a  condition  that  no  action  shall  lie  against  the  com- 
pany unless  brought  to  reimburse  the  insured  "for  loss  actual- 
ly sustained  and  paid  by  him  in  satisfaction  of  a  final  judg- 
ment" where  bad  faith  in  giving  the  note  is  not  shown,  and 
the  settlement  was  approved  by  the  probate  court.  Taxicab 
Motor  Co.  v.  Pacific  Coast  Casualty  Co.  of  San  Francisco 
(1913)  73  Wash.  631,  132  Pac.  393. 

A  condition  of  payment  by  the  insured  "within  ninety 
days  from  the  date  of  such  judgment  and  after  trial  of  the 
issues"  is  satisfied  by  payment  within  ninety  days  after  the 
date  of  affirmance  of  the  judgment  by  the  Supreme  Court. 
Taxicab  Motor  Co.  v.  Pacific  Coast  Casualty  Co.  (1913)  73 
Wash.  631,  132  Pac.  393. 

Where  judgments  were  recovered  against  the  insured  and, 
being  insolvent,  it  borrowed  the  money  and  paid  the  judg- 
ments, giving  its  note  to  the  lender,  and  afterwards  took 
up  the  note  by  assigning  its  cause  of  action  against  the  insur- 
ance company,  it  was  held  that  the  burden  was  on  the  insur- 
ance company,  seeking  to  escape  liability  on  the  ground  of 
bad  faith,  to  show  some  fact  that  would  impeach  the  trans- 
actions, in  the  absence  of  a  provision  in  the  policy  that  the 
company  shall  not  be  lable  if  the  insured  becomes  insolvent 
and  borrows  money  to  pay  losses.  Campbell  v.  London  & 
Lancashire  Indemnity  Co.  of  America  (1917)  168  N.  Y.  Supp. 
300. 

A  provision  in  an  indemnity  policy  that :  "No  action  shall 
lie  against  the  company  to  recover  for  any  loss  or  expense 


148  AUTOMOBILE  INSURANCE  LAW 

under  this  policy  unless  it  shall  be  brought  by  the  assured 
after  actual  trial  of  the  issue,"  was  held  satisfied  where  the 
assured  refrained  from  settling  an  action  against  him  until 
after  a  complete  record  of  the  facts  relating  to  his  liability 
had  been  made  by  the  presentation  of  all  the  evidence,  espe- 
cially where  the  insurance  company  had  broken  its  contract 
by  refusing  to  defend  the  action  against  the  assured.  Mayor, 
Lane  &  Co.  v.  Commercial  Casualty  Insurance  Co.  (1915)  169 
App.  Div.  772,  155  N.  Y.  Supp.  75. 

A  policy  providing  that  if  any  person  should  sustain  bodily 
injury  by  accident  by  reason  of  the  use  of  the  automobile 
for  which  injury  the  insured  should  be  or  be  alleged  to  be 
liable  for  damages,  the  company  would  indemnify  him  against 
such  liability  and  would  pay  all  costs  incurred  with  the  com- 
pany's written  consent  indemnifies  against  liability  as  dis- 
tinguished from  loss;  and  where  the  company  refuses  to  de- 
fend an  action  against  the  insured,  it  is  liable  for  a  reason- 
able attorney's  fee,  for  which  the  plaintiff  has  rendered  him- 
self liable  in  defending  the  action,  though  he  has  not  paid 
the  fee.  Royal  Indemnity  Co.  v.  Schwartz  (1915) — Tex. 
Civ.  App.— 172  S.  W.  581. 

§128.  Condition  as  to  Payment  Prohibited  by  Statute. — 
Massachusetts  St.  1914,  c.  464,  which  in  substance  prohibits 
the  insertion  in  a  contract  of  casualty  insurance,  made  after 
that  statute  took  effect,  of  a  condition  that  the  insured  must 
pay  the  amount  of  the  loss  before  liability  attaches  to  the 
insurer,  is  held  constitutional  by  the  courts  of  that  state. 
Lorando  v.  Gethro,  (1917)  228  Mass.  181,  117  N.  E.  185. 

§129.     Voluntary  Payment  by  Insured  Not  Actual  Payment. 

— An  insured  company  cannot,  by  its  voluntary  act  in  de- 
fending suit  against  its  manager,  add  to  the  liability  of  the 
indemnity  company,  and  thus  make  it  indemnify  the  manager 
against  the  consequences  of  his  negligence.  So,  where  a 
policy  provided  that  no  action  would  lie  against  the  insur- 
ance company  under  it  unless  brought  to  reimburse  insured 
for  a  loss  paid  in  money  after  trial  in  satisfaction  of  a  judg- 
ment against  the  insured,  the  company  was  held  not  liable 


INDEMNITY  INSURANCE  149 

where  the  insured,  a  company,  defended  and  paid  a  judgment 
against  its  manager  for  injuries  caused  while  the  car  was  be- 
ing used  by  the  manager  for  his  own  purposes.  Rock  Springs 
Distilling  Co.  v.  Employers'  Indemnity  Co.  of  Philadelphia 
(1914)  160  Ky.  317,  169  S.  W.  730. 

§130.     Right  of  Person  Injured  to  Sue  Insurance  Company. 

— Akin  to  the  question  as  to  whether  a  policy  is  a  contract 
of  liability  or  indemnity  is  that  of  the  right  of  the  person  in- 
jured to  sue  the  insurance  company. 

An  indemnity  policy  contained  the  following  provision : 
"No  action  shall  lie  against  the  company  to  recover  for 
any  loss  or  expenses  under  this  policy  unless  it  shall  be 
brought  by  the  assured  for  loss  or  expense  actually  sustained 
and  paid  in  money  by  him  after  actual  trial  of  the  issues,  nor 
unless  such  action  is  brought  within  two  years  after  payment 
of  such  loss  or  expense."  In  July,  1911,  a  person  was  injured 
by  an  automobile  operated  by  the  automobile  company  pro- 
tected by  this  policy  and  recovered  a  judgment  for  $1,500  in 
November,  1912.  The  automobile  company  went  into  the  hands 
of  a  receiver  some  time  in  1911.  No  part  of  the  judgment 
was  ever  paid  to  the  injured  person,  although  he  demanded 
payment  from  the  receiver,  and  requested  him  to  bring  suit 
on  the  insurance  policy,  and  offered  to  indemnify  him  for 
any  cost  incurred  in  that  behalf.  The  injured  person  then 
sued  the  insurance  company. 

The  Alabama  Supreme  Court  held  that  under  the  express 
provisions  of  the  policy,  the  assured,  the  auto  company,  had 
no  right  of  action  against  the  insurance  company,  except 
for  liabilities  actually  discharged  by  the  payment  of  money. 
Not  having  met  this  essential  condition  of  the  indemnity  con- 
tract, the  auto  company  could  not  itself  maintain  any  action 
on  the  policy.  Certainly  a  stranger  to  the  contract  could  not 
do  so  directly  or  indirectly.  Goodman  v.  Georgia  Life  Ins. 
Co.  (1914)  189  Ala.  130,  66  So.  649,  disapproving  the  doctrine 
of  Patterson  v.  Adan  (Philadelphia  Casualty  Co.,  etc.  Gar- 
nishees,  1912)  119  Minn.  308,  138  N.  W.  281,  48  L.  R.  A.  (U.  S.) 
184  and  citing  a  number  of  employers'  indemnity  cases  in 


150  AUTOMOBILE  INSURANCE  LAW 

support  of  its  opinion..  The  court  said :  "Courts  cannot  tamper 
with  and  change  the  terms  of  contracts,  nor  can  they  sub- 
stitute as  beneficiaries  thereunder  unnamed  and  unintended 
strangers  who  have  nothing  whatever  to  do  with  either  the 
contracts  or  the  contractors.  To  exercise  such  powers  would 
be  to  usurp  despotic  authority. 

"If  the  insurance  company  received  the  funds  of  the  auto 
company  in  payment  of  the  policy  premium  under  circum- 
stances which  made  their  diversion  from  the  coffers  of  the 
auto  company  a  material  fraud  upon  complainant,  he  might 
recover  the  amount  of  the  premium  in  a  proper  proceed- 
ing; but  he  cannot  claim  the  fruits  of  the  contract."  It  was 
held  to  be  immaterial  that  the  insurance  company's  attorney, 
at  its  instance,  defended  the  suit  against  the  auto  company 
for  a  time,  and  then  suffered  a  judgment  by  default. 

The  Alabama  court,  on  a  rehearing  of  the  Goodman  case, 
considered  that  a  contrary  construction  of  such  an  insurance 
contract,  "is  dominated  by  an  undue  regard  for  the  injured 
stranger,  rather  than  by  a  consideration  alone  of  the  intention 
and  the  obligations  of  the  contracting  parties.  Such  insur- 
ance contracts  as  these  may  be  one-sided  and  unsatisfactory  in 
their  operation,  but  we  know  of  no  principle  of  law  or  public 
policy  which  forbids  their  operation  exactly  as  stipulated 
by  the  parties,  with  which,  as  already  stated,  a  stranger  to 
the  contract  has  absolutely  no  concern." 

Where,  under  the  clear  provisions  of  the  policy,  it  operates 
for  the  benefit  of  any  injured  person,  and  such  injured  person 
is  authorized  to  sue  the  insurance  company,  such  person  may, 
under  the  Texas  system  of  procedure,  join  in  the  same  action 
the  owner  of  the  car  and  the  insurer,  even  though  the  insurer 
is  liable  only  after  judgment  has  been  awarded  against  the 
owner,  and  the  cause  of  action  against  the  owner  sounds  in 
tort  and  that  against  the  insurer  is  based  on  contract ;  the 
two  causes  of  action  arising  out  of  the  same  transaction. 
American  Automobile  Insurance  Co.  v.  Struwe,  (1920) — Tex. 
Civ.  App.— 218  S.  W.  534. 

Massachusetts  St.  1914,  c.  464,  which  gives  to  a  person 


INDEMNITY  INSURANCE  151 

injured  by  fault  of  the  insured  in  a  manner  covered  by  the 
policy  a  beneficial  interest  in  the  proceeds  thereof  and  per- 
mits him,  after  he  has  obtained  a  judgment  against  the  in- 
sured, to  maintain  a  suit  in  equity  in  his  own  name  to  pro- 
cure the  application  of  the  insurance  money  to  the  satisfaction 
of  his  judgment,  is  held  constitutional  in  Lorando  v.  Gethro 
(1917)  228  Mass.  181,  117  N.  E.  185. 

§131.  "Bodily  Injury"  As  Affecting  Third  Person's  Right 
to  Recover. — The  Massachusetts  statute,  St.  1914,  c.  464, 
permits  a  judgment  creditor  of  one  insured  by  a  con- 
tract of  casualty  insurance  against  loss  or  damage  on  account 
of  bodily  injury  or  death  by  accident  of  any  person  arising 
from  causes  for  which  the  insured  is  responsible,  such  judg- 
ment having  been  recovered  for  a  cause  covered  by  the  con- 
tract of  insurance,  to  proceed  in  equity  against  the  insured  and 
the  insurer  to  reach  and  apply  the  insurance  money  to  the 
satisfaction  of  the  judgment. 

The  language  of  the  statute  renders  it  applicable  to  every 
contract  of  insurance  whereby  one  "is  insured  against  loss  or 
damage  on  account  of  the  bodily  injury  or  death  by  accident 
of  any  person."  The  words  "loss  or  damage"  in  this  connec- 
tion in  the  light  of  their  context,  and  the  manifest  purpose 
of  the  statute,  include  a  case  where  the  insured  has  been  held 
responsible  to  the  extent  of  the  rendition  of  a  judgment 
against  him,  although  no  payment  has  been  made  on  the 
judgment. 

"Bodily  injury",  as  used  in  the  statute,  imports,  as  it  or- 
dinarily does,  harm  from  corporeal  contact.  In  this  con- 
nection "bodily"  refers  to  an  organism  of  flesh  and  blood. 
It  is  not  satisfied  by  anything  short  of  physical,  and  is  con- 
fined to  that  kind  of  injury,  it  does  not  include  damage  to 
the  financial  re>ot:ices  of  thi  husband  arising  from  a  bodily 
injuiy  to  his  wife.  Personal  injury  in  other  connections  has 
been  held  to  be  of  more  comprehensive  significance.  But 
"bodily  injury  *  *  *  of  any  person"  cannot  reasonably  be 
held  to  include  the  kind  of  loss  suffered  by  the  husband. 
Therefore  the  husband  is  not  entitled  to  recover  the  insur- 


152  AUTOMOBILE  INSURANCE  LAW 

ance  money  in  such  a  suit.  Williams  v.  Nelson,  (1917)  228 
Mass.  191,  177  N.  E.  189. 

§132.  Judgment  Against  Insured;  Garnishment. — Where, 
under  a  policy  insuring  against  loss  by  the  operation  of  the 
insured's  automobile,  an  action  is  brought  by  a  person  injured 
by  the  car  against  the  insured,  and  the  insurance  company 
thereupon  takes  sole  charge  of  the  defense,  to  the  exclusion  of 
the  insured,  as  it  had  the  right  to  do  under  the  policy,  it  has 
been  held  that  a  judgment  in  the  action  against  the  insured  be- 
comes, as  between  the  plaintiff,  the  defendant,  and  the  com- 
pany, a  liability  or  debt  owing  unconditionally  by  the  com- 
pany to  the  insured,  which  the  plaintiff  may  reach  by  gar- 
nishment. Patterson  v.  Adan,  (1912)  119  Minn.  308,  138  N. 
W.  281.  The  court  admitted  that  this  conclusion  is  not  in 
accord  with  the  weight  of  authority;  but  in  the  cases  cited 
to  sustain  the  opposite  of  the  rule  it  was  not  clear  that  the 
company  took  exclusive,  or  any,  charge  of  the  litigation,  and 
therefore,  in  the  court's  opinion,  sufficient  consideration  was 
not  given  to  this  feature  of  the  contract.  (The  doctrine  of 
this  case  was  disapproved  in  Goodman  v.  Georgia  Life  Ins. 
Co.,  189  Ala.  130.) 

§133.     Aid  by  Insured  in  Defense  of  Negligence  Action. — 

The  insured  in  an  indemnity  policy  is  usually  required  by  a 
clause  in  the  policy  to  assist  in  the  defense  of  actions  against 
him. 

An  automobile  indemnity  policy  contained  the  provision 
that :  "The  assured,  when  requested  by  the  company,  shall 
aid  in  effecting  settlements,  securing  evidence,  the  attendance 
of  witnesses  and  in  prosecuting  appeals."  While  riding  with 
the  assured  in  the  car,  the  assured's  sister  was  injured  by 
falling  from  the  front  seat  when  the  car  skidded  or  by  other 
accidental  means  struck  a  post  at  the  edge  of  the  pavement. 
She  sued  her  sister,  recovering  a  verdict  and  judgment  for 
$730  and  costs.  The  assured  sued  the  insurance  company. 
One  of  the  company's  defenses  was  that  the  assured  failed  to 
comply  with  the  quoted  provision  requiring  her  to  assist  in 


INDEMNITY  INSURANCE  153 

procuring  evidence  for  use  in  defense  of  any  action,  or  to 
rely  in  her  defense  upon  a  plea  of  contributory  negligence 
of  her  sister.  There  was  some  evidence  of  eye-witnesses 
that  the  injured  sister  was  sitting  sidewise  on  the  edge 
of  the  front  seat  with  her  back  to  the  door,  talking  "to  the 
assured,  who  sat  on  the  back  seat.  It  was  held  that  it  was 
for  the  jury,  which  found  for  the  insurance  company,  to  say 
whether  the  refusal  to  plead  contributory  negligence  was  a 
violation  of  the  quoted  clause.  Collins'  Executors  v.  Stan- 
dard Accident  Insurance  Co.,  (1916)  170  Ky.  27,  185  E.  W.  112. 

In  this  case  the  insurance  company's  chief  defense  was 
that  the  judgment  recovered  against  the  insured  by  her  sister 
was  procured  by  and  through  fraud  and  collusion  between 
them.  The  evidence  in  the  negligence  case,  the  company 
contended,  showed  (1)  that  the  insured,  in  notifying  it  of 
the  accident,  claim  and  action,  falsely  represented  that  there 
were  no  witnesses  known  to  her  other  than  her  sister  and 
herself,  when  she  knew  that  the  accident  was  witnessed  by 
her  own  chauffeur  and  by  another  chauffeur,  who  lifted  her 
sister  from  the  street  and  placed  her  in  the  automobile  after 
the  accident ;  (2)  that  in  giving  such  notice,  she  suppressed 
information  of  the  fact  that  the  injured  person  was  her  sister 
and  had  resided  with  her  for  several  years,  and  falsely  repre- 
sented that  her  residence  was  elsewhere ;  (3)  that  she  failed 
and  refused  to  render  assistance  to  the  insurance  company  in 
securing  evidence  for  use  in  the  trial  of  her  sister's  action 
against  her,  and  refused  to  make  the  defense  advised  her  by 
the  insurance  company's  counsel  would  be  authorized  by  the 
law  and  facts ;  and  (4)  that  she  gave  assistance  to  her  sister 
in  the  latter's  action  against  her,  by  carrying  her  in  her  auto- 
mobile to  her  attorney's  office  during  the  latter's  prepara- 
tion of  the  case  for  trial,  carrying  her  and  some  of  her  wit- 
nesses to  and  from  the  courthouse  during  the  trial,  and,  on 
one  occasion,  during  the  trial,  taking  her  sister  and  her  wit- 
nesses to  a  restaurant  for  luncheon  and  returning  them  to  the 
courthouse.  This  was  held  sufficient  to  authorize  submis- 


154  AUTOMOBILE  INSURANCE  LAW 

sion  to  the  jury  of  the  question  of  fraud  and  collusion  be- 
tween the  assured  and  the  injured  person. 

A  valid  defense  to  an  action  on  an  indemnity  policy  that 
the  insured  did  not  render  the  company  such  co-operation 
and  assistance  in  the  defense  of  the  action  against  the  in- 
sured as  the  policy  required  is  held  not  shown  by  the  fact 
that  an  officer  of  the  insured  at  the  inquest  made  certain 
statements  concerning  the  instructions  given  the  different 
drivers  with  reference  to  their  duties  which  conflicted  with 
his  evidence  at  the  trial  of  the  action  for  damages,  where  it 
is  not  shown  that  he  wilfully  testified  falsely  or  that  his 
testimony  affected  the  jury's  verdict.  Taxicab  Motor  Co.  v. 
Pacific  Coast  Casualty  Co.  (1913)  73  Wash.  631,  132  Pac.  393. 

If  the  company,  taking  charge  of  the  defense  of  the  action 
against  the  insured,  has  a  defense  that  other  causes  than 
the  wounds  inflicted  by  the  automobile  caused  the  death  sued 
for,  it  should  make  that  defense  in  the  action  for  damages, 
and  cannot  afterwards  make  it  in  an  action  on  the  policy. 
Taxicab  Motor  Co.  v.  Pacific  Coast  Casualty  Co.  (1913)  73 
Wash.  631,  132  Pac.  393. 

§134.    Settlements  by  Insured  Without  Insurer's  Consent. 

— A  clause  in  an  indemnity  policy  provided:  "The  assured 
may  settle  any  case  at  the  assured's  own  expense,  giving 
immediate  notice  thereof  in  writing  to  the  company,  and  the 
assured  may  settle  any  case  at  the  company's  expense,  if  the 
company  shall  have  previously  given  its  consent  in  writing." 
Under  such  a  clause  a  settlement  by  the  insured  without  the 
insurance  company's  consent  will  release  the  company  from 
all  liability  to  the  insured.  Kennelly  v.  London  Guarantee 
&  Accident  Co.,  Ltd,  (1918)  184  App.  Div.  1,  171  N.  Y.  Supp. 
423. 

An  insured  sued  on  a  policy  for  $5,000,  against  loss  or  ex- 
pense on  account  of  bodily  injuries  accidentally  suffered  by 
reason  of  the  use  of  his  automobile.  It  was  alleged  that  the 
insured  agreed  to  compromise  an  action  for  $10,000  against 
him  for  $3,150;  that  the  insurance  company,  to  escape  pay- 
ment of  $750  of  this  sum,  refused  to  compromise  the  claim 


INDEMNITY  INSURANCE  155 

unless  the  insured  would  contribute  that  sum  to  the  $3,150, 
and  threatened  that  otherwise  it  would  allow  the  case  to  go 
to  trial  and  subject  the  insured  to  the  hazard  of  having  a 
verdict  recovered  against  him  in  excess  of  the  $5,000  limit 
of  the  policy,  and  forced  the  insured  to  pay  the  $750.  It  was 
held  that,  as  there  was  no  allegation  that  by  the  terms  of 
the  policy  (which  was  not  itself  made  part  of  the  complaint), 
the  insurance  company  agreed  to  consent  to  a  settlement  of 
any  claim  for  less  than  the  $5,000  limit,  provided  the  sum 
the  claimant  was  willing  to  accept  was  reasonable  and  fair 
and  less  than  the  amount  which  would  probably  be  recovered 
in  an  action,  the  complainant  failed  to  make  out  a  cause  of 
action.  Levin  v.  New  England  Casualty  Co.,  (1916),  97  Misc. 
7,  160  N.  Y.  Supp.  1041 ;  (1917),  101  Misc.  402,  166  N.  Y.  Supp. 
1055,  affirmed  (1919)  187  App.  Div.  935,  174  N.  Y.  Supp.  910. 

Where  the  insurance  company  fails  to  perform  its  contract 
duty  to  defend,  it  waives  the  right  to  the  benefit  of  provisions 
precluding  the  assured  from  settling  and  limiting  its  liability 
to  losses  sustained  by  the  assured  after  the  trial  of  the  issues. 
But  when,  under  such  a  policy,  the  insured  settles  an  action 
before  judgment,  he  assumes  the  risk  in  an  action  against 
the  insurance  company  of  showing,  not  only  a  liability  cov- 
ered by  the  policy,  but  the  amount  of  the  liability,  and  the 
recovery  against  the  insurance  company  will  be  limited  by 
the  loss  sustained,  though  the  evidence  may  show  that  the 
settlement  was  for  less  than  the  liability.  Mayor,  Lane  &  Co. 
v.  Commercial  Casualty  Co.,  (1915)  169  App.  Div.  772,  155  N. 
Y.  Supp.  75. 

§135.  Effect  of  Insurer's  Refusal  to  Accede  to  Compro- 
mise.— The  holder  of  a  policy  indemnifying  the  insured  to 
the  extent  of  $5,000  against  loss  by  accident  resulting  in  in- 
juries or  death  to  any  person,  pending  suit  by  the  administra- 
trix of  a  person  alleged  to  have  died  as  the  result  of  such  an 
accident,  which  suit  was  defended  by  the  insurance  company, 
learned  of  the  willingness  of  the  plaintiff  to  accept  $3,750  in 
full  settlement  of  any  damages  that  might  be  recovered  in 
excess  of  $5,000,  but  the  insured  did  not  pay  that  sum  to  the 


156  AUTOMOBILE  INSURANCE  LAW 

administratrix.  It  was  held  that  the  insurance  company 
was  not  liable  for  damages  caused  to  the  insured  by  an  excess 
judgment  on  account  of  the  insurer's  refusal  to  accede  to  the 
proposed  compromise. 

The  policy  in  this  case  merely  provided  that  the  insured 
might  not  incur  expense  or  settle  a  claim  "except  at  his  own 
cost."  It  was  held  that  payment,  pending  suit,  of  the  $3,750 
which  the  administratrix  offered  to  accept  in  settlement  of 
any  damages  she  might  recover  in  excess  of  $S,000,  was  not 
forbidden,  where  such  payment  would  not  increase  the  com- 
pany's liability  or  enhance  its  difficulties  in  defending  the 
action. 

On  the  latter  point,  two  of  the  five  judges  dissented,  on 
the  ground  that  "the  plaintiff  expressly  agreed  that  he  would 
not,  without  the  written  consent  of  the  insurance  company, 
settle  any  claim  or  interfere  in  any  legal  proceeding;"  that 
the  proposed  payment  or  settlement  "would  have  been  a  vio- 
lation of  his  agreement,  and  it  was  for  the  insurance  com- 
pany to  say  whether  or  not  it  would  permit  him  to  do  as  he 
wished."  McAleenan  v.  Massachusetts  Bonding  &  Ins.  Co. 
(1916)  173  App.  Div.  100,  159  N.  Y.  Supp.  401  affirmed  219  N. 
Y.  563,  114N.  E.  114.  M;  |: 

§136.  Interference  with  Negotiations. — What  constitutes 
"interference"  within  the  meaning  of  a  clause  forbidding  the 
insured  to  "interfere  in  negotiations  for  compromise"  it  would 
in  many  cases  be  difficult  to  say.  It  has  been  held,  however, 
that  such  a  condition  is  not  breached  by  the  insured's  action 
in  mentioning  to  a  party  he  had  injured  the  fact  of  his  in- 
surance and  telephoning  him  that  the  lawyer  who  would 
call  on  him,  though  he  might  call  himself  the  insured's  law- 
yer, was  not  his,  but  the  insurance  company's.  Hopkins  v. 
American  Fidelity  Co.  (1916),  91  Wash.  680,  158  Pac.  535. 
The  court  said:  "It  is  obviously  impossible  for  the  assured  to 
avoid  conversation  with  the  injured,  their  families,  or  their 
representatives.  Indeed,  the  insurer  himself  must  desire  them 
,to  say  what  they  can  to  reduce  irritation.  If  they  are  then 
compelled  to  admit  that  they  are  insured,  the  law  will  not 


INDEMNITY  INSURANCE  157 

forbid  their  admitting  the  truth,  and  as  to  their  voluntarily 
telling  it,  that  is  saying  little  more  than  claimants  know.  The 
vast  majority  of  those  who  own  automobiles  are  thus  in- 
sured, and  nearly  every  claimant  knows  or  believes  that  they 
are.  Neither  can  we  assume  that  even  if  claimants  do  not 
know  or  suppose  this,  they  will  be  harder  to  deal  with  when 
they  find  it  out.  That  will  depend  on  whether  the  owner  ap- 
pears of  ample  means  himself." 

§137.  Interference  in  Suits. — Under  a  provision  in  a  liability 
policy  that  the  insured  should  not  "interfere  in  any  negotia- 
tions for  settlement  or  legal  proceeding  without  the  consent 
of  the  company  previously  given  in  writing,"  it  was  held 
that  a  settlement  by  the  insured  of  a  suit  brought  by  him 
against  a  third  person,  resulting  from  a  collision  with  such 
third  person's  automobile,  did  not  violate  the  policy,  since  the 
insurer,  while  having  a  right  to  control  suits  brought  against 
the  insured,  could  not  control  suits  by  the  insured.  And  it 
was  immaterial  that  it  was  stipulated  in  such  settlement  that 
it  should  not  be  used  in  evidence  in  actions  against  the  in- 
sured, in  the  absence  of  a  proven  conspiracy  on  the  part  of 
the  insured  and  others  to  aid  the  prosecution  of  suits  against 
the  insured  and  to  impair  the  defense  of  them  by  the  insur- 
ance company  to  its  pecuniary  loss.  Utterback-Gleason  Co.  v. 
Standard  Ace.  Ins.  Co.  of  Detroit,  (1920)  179  N.  Y.  Supp.  836. 

Where  a  liability  policy  contains  a  condition  providing  that 
the  insured  "shall  not  interfere  in  any  negotiations  for  set- 
tlement or  in  any  legal  proceeding  against  the  company  on 
account  of  any  claim,"  the  insured  has  no  claim  against  the 
company  beyond  the  limit  of  liability 'prescribed  by  the  policy, 
although  the  company  took  charge  of  the  litigation  against 
him  upon  which  the  claim  was  based  and  refused  to  make  a 
settlement  for  much  less  than  the  judgment  ultimately  re- 
covered. Such  a  condition  places  the  litigation  wholly  within 
the  control  of  the  company  without  regard  to  the  fact  that 
its  conduct  may  result  in  a  judgment  against  the  insured 
greatly  in  excess  of  the  limit  of  liability  in  the  policy. 
McClung  v.  Pennsylvania  Taximeter  Cab  Co.,  (1916),  25  Pa. 


158  AUTOMOBILE  INSURANCE  LAW 

Dist.  583,  quoting  and  following  Schmidt  v.  Travelers'  In- 
surance Co.,  244  Pa.  286,  construing  a  similar  clause. 

§138.  Waiver  by  Insurer  of  Defense  by  Assuming  Control 
of  Suit. — A  defense  by  the  insurer  that  the  liability  is  not 
within  the  terms  of  the  policy,  is  waived  when  it,  with  knowl- 
edge of  the  facts,  and  without  reserving  its  rights,  assumes 
absolute  control  of  the  action  brought  against  the  insured. 
American  Indemnity  Co.  v.  Fellbaum  (1920), — Tex.  Civ.  App. 
— 225  S.  W.,  873;  Oakland  Motor  Co.  v.  American  Fidelity 
Co.  (1916)  190  Mich.  74.  (See  §142.) 

Where  the  insured  corporation  warned  the  insurance  com- 
pany that  the  latter  would  be  held  to  the  terms  of  the  policy, 
notwithstanding  a  release  executed  by  the  president  of  the 
insured  corporation  in  settlement  of  his  personal  injury  action 
against  the  driver  of  the  automobile  with  which  he,  in  the 
insured  corporation's  automobile,  had  collided,  that  the  in- 
sured corporation  would  insist  on  the  insurance  company's 
defending  suits  by  occupants  of  the  other  automobile,  and 
that  the  insured  corporation  would  not  accept  the  insurance 
company's  proposition  to  defend  the  actions  without  waiver 
of  or  prejudice  to  the  insurance  company's  right  to  disclaim 
liability,  the  insurance  company,  by  remaining  in  and  con- 
tinuing to  defend  such  an  action  against  the  insured  corpora- 
tion, was  held  estopped,  after  judgment  had  been  rendered 
against  the  insured,  from  disclaiming  liability  on  the  policy 
because  of  such  release.  Utterback-Gleason  v.  Standard  Ac- 
cident Insurance  Co.,  (1920)  193  App.  Div.  646,  184  N.  Y. 
Supp.  862,  affirming  179  N.  Y.  Supp.  836.  jWhere  an  in- 
surance company  has,  with  full  knowledge  of  the  facts, 
undertaken  to  defend  against  the  claim  and  suit  of  a  per- 
son injured  by  an  automobile  which  is  the  subject  of  a 
liability  policy,  in  which  the  company  has  not  only  bound 
itself  to  assume  the  defense  of  "any  claim"  against  which 
it  undertakes  to  indemnify  the  insured,  but  has  also  excluded 
him  from  all  right  to  act  independently  of  the  company  in 
the  matter  of  such  suit,  by  a  provision  in  the  policy  that 
the  "assured  shall  not  voluntarily  assume  any  liability,  either 
before  or  after  the  accident,  nor  shall  he,  without  the  written 


INDEMNITY  INSURANCE  159 

consent  of  the  company,  incur  any  expense  or  settle  any  claim 
except  at  his  own  cost,  nor  interfere  in  any  negotiation  for 
settlement  or  in  any  legal  proceeding  conducted  by  the  com- 
pany on  account  of  any  claim,  "the  company  cannot,  while  the 
case  is  still  pending  and  undetermined,  rightfully  abandon  it 
for  no  better  reasons  than  its  belated  conviction  that  the 
policy  did  not  impose  upon  it  the  duty  to  assume  such  de- 
fense because  the  accident  was  caused  while  the  car  was 
being  driven  by  the  owner's  son  and  not  by  himself."  Fuller- 
ton  v.  United  States  Casualty  Co.,  (1919),  184  Iowa  219,  167 
N.  W.  700.  The  court  said  that  the  conduct  of  the  insurance 
company  in  taking  the  business  out  of  the  hands  of  the 
insured  after  it  was  notified  of  the  accident  and  two  claims 
arising  therefrom  "was  tantamount  to  an  agreement  or 
mutual  concession  that  the  policy  was  intended  to  cover  these 
claims  for  damages,  and,  both  parties  having  proceeded  on 
that  basis  to  a  settlement  with  the  Hockenburgs,  and  on  to 
a  point  midway  in  the  Jacobson  suit,  the  insurer  will  not  be 
permitted  then  to  change  front,  abandon  a  defense  it  had 
undertaken,  and  escape  liability,  on  the  plea  that  it  has  mis- 
taken the  nature  of  its  obligation." 

The  insurance  company,  however,  does  not  waive  its  rights 
to  disclaim  liability  under  the  policy  by  continuing  the  trial 
of  the  negligence  action  for  a  brief  period  after  learning 
facts  absolving  it  from  liability ;  as  where,  after  it  has  learned, 
on  the  last  day  of  the  trial,  that  the  supposed  licensed  chauf- 
feur accompanying  the  insured's  minor  son  was  not  duly 
licensed.  Morrison  v.  Royal  Indemnity  Co.,  (1917),  180  App. 
Div.  709,  167  N.  Y.  Supp.  732. 

§139.  Effect  of  Insurer's  Failure  to  Appeal. — Where  a 
liability  company  assumed  the  defense  of  an  action  against 
an  insured  owner,  and  a  judgment  was  entered  for  a  sum 
exceeding  the  amount  of  its  liability,  and  the  company, 
through  its  attorneys,  promised  and  assured  the  owner  that 
it  would  appeal  and  secure  a  reversal  of  the  judgment,  but 
failed  to  appeal,  the  owner  not  being  advised  of  such  failure 
until  after  the  time  to  appeal  had  expired,  the  company,  in 


160  AUTOMOBILE  INSURANCE  LAW 

an  action  by  the  owner .  to  recover  damages  suffered  by 
reason  of  the  company's  failure  to  appeal,  was  held  estopped 
to  deny  its  liability,  and  that  the  defendant  was  damaged  to 
the  extent  of  the  sum  he  was  compelled  to  pay.  McAleenan 
v.  Massachusetts  Bonding  &  Ins.  Co.,  (1920)  190  N.  Y.  App. 
Div.  657,  180  N.  Y.  Supp.  287,  affirmed  219  N.  Y.  563. 

If  the  judgment  against  the  insured  in  a  negligence  action 
exceeds  the  insurer's  liability,  the  Tennessee  Supreme  Court 
holds  that  the  insurer  must  either  provide  the  required  super- 
sedeas  bond,  and  appeal,  or  pay  the  indemnity  agreed  upon. 
Seessel  v.  New  Amsterdam  Casualty  Co.  (1918)  140  Tenn. 
253,  204  S.  W.  428. 

§140.  Insurer  Cannot  be  Enjoined  from  Defending  Suit 
Against  Assured. — An  automobile  insurance  company  cannot 
be  restrained  by  an  injunction  from  appearing  by  its  own 
counsel  and  conducting  the  defense  in  an  action  against  the 
assured  owner  of  an  automobile  to  recover  damages  for  per- 
sonal injuries.  Gould  v.  Brock,  (1908)  221  Pa.  38,  69  Atl.  1122. 

§141.  Necessity  for  Notice  to  Insurer  of  Accident. — Under 
a  policy  requiring  immediate  notice  to  the  insurer  of  acci- 
dents insured  against,  it  is  said  that  the  condition  does  not 
apply  to  every  trivial  occurrence  even  though  it  may  prove 
afterwards  to  result  in  serious  injury,  and  that,  if  no  apparent 
harm  come  from  the  mishap,  and  there  is  no  reasonable 
ground  for  believing  at  the  time  that  bodily  injury  will  fol- 
low, there  is  no  duty  upon  the  insured  to  notify  the  insurer. 
Haas  Tobacco  Co.  v.  American  Fidelity  Co.  (1919)  226  N.  Y. 
343,  (affirming  165  N.  Y.  Supp.  230),  citing  Melchior  v>. 
Ocean  Accident  &  Guarantee  Corp.  (1919)  226  N.  Y.  51.  See 
also  Fischer  Auto  &  Service  Co.  v.  General  Accident,  Fire  & 
Life  Assur.  Corp.  (1917)  8  Ohio  App.  176. 

But  this  principle  is  not  to  be  extended.  Where  a  boy  was 
knocked  down  in  the  street,  and  at  least  slightly  injured,  it 
was  held  that  the  insured  may  not,  without  any  investiga- 
tion whatever,  rely  solely  upon  his  own  opinion,  or  upon  that 
of  his  chauffeur,  that  because  the  boy  went  away  the  injury 


INDEMNITY  INSURANCE  161 

was  too  trivial  to  require  attention  or  investigation,  and  he 
is  not  excused  from  giving  notice  of  the  accident.  Haas 
Tobacco  Co.  v.  American  Fidelity  Co.  (1919)  226  N.  Y.  343, 
123  N.  E.  755,  affirming  165  N.  Y.  Supp.  230. , 

Under  a  provision  requiring  that  the  assured,  upon  the  oc- 
currence of  an  accident,  shall  give  immediate  written  notice 
thereof  to  the  company,  it  may  well  be  claimed  that  if  the 
insured  or  his  driver  knows  of  even  a  slight  injury  to  a  third 
person  in  a  collision,  the  stipulation  of  the  policy  would  re- 
quire notice  of  such  injury,  even  though  the  insured  might 
deem  it  unnecessary.  Fischer  Auto  &  Service  Co.  v.  General 
Accident  Fire  &  Life  Assur.  Corp.  (1917)  8  Ohio  App.  176. 

It  is  proper  to  submit  to  the  jury  the  questions  of  fact 
whether  the  circumstances  of  the  accident  were  such  as  would 
have  made  it  apparent  to  the  insured  that  bodily  injuries 
might  result  from  the  accident  and  whether  the  terms  of 
the  policy  as  to  notice  had  been  complied  with.  Fischer  Auto 
&  Service  Co.  v.  General  Accident,  Fire  &  Life  Assurance 
Corp.  (1917)  8  Ohio  App.  176. 

Under  a  policy  insuring  against  loss  by  liability  for  damages 
for  bodily  injuries,  notice  of  injuries  to  property  only  is  not 
required.  Fischer  Auto  &  Service  Co.  v.  General  Accident, 
Fire  &  Life  Assur.  Corp.  (1917)  8  Ohio  App.  176. 

§142.  Time  for  Notice  of  Accident. — The  question  of  rea- 
sonableness of  time  within  which  notice  is  given  the  insur- 
ance company  of  an  accident  for  which  a  claim  is  made  under 
an  indemnity  policy,  and  of  the  sufficiency  of  excuses  for 
delay,  is  to  be  determined  according  to  the  nature  and  cir- 
cumstances of  each  individual  case,  the  insured  in  all  cases 
being  required  to  act  with  due  diligence  and  without  laches 
on  his  part.  Chapin  v.  Ocean  Accident  &  Guarantee  Corp. 
(1919)  96  Neb.  213,  147  N.  W.  465,  52  L.  R.  A.  (N.  S.)  227; 
Fischer  Auto  &  Service  Co.  v.  General  Accident,  Fire  &  Life 
Assurance  Corp.,  (1917)  8  Ohio  App.  176;  Schambelan  v.  Pre- 
ferred Accident  Insurance  Co.,  (1916),  62  Pa.  Superior  Ct.  445. 

In  a  syllabus  by  the  court  in  Chapin  v.  Ocean  Accident,  etc., 
Co.,  it  is  said :  "In  a  case  where  no  bodily  injury  is  apparent 


162  AUTOMOBILE  INSURANCE  LAW 

at  the  time  of  the  accidental  occurrence,  and  there  is  no  rea- 
sonable ground  for  believing  that  a, claim  for  damages  against 
the  owner  of  the  automobile  may  arise  therefrom,  he  is  not 
required  to  give  the  assurer  notice  until  the  subsequent  facts 
as  to  injury  would  suggest  to  a  person  of  ordinary  and  rea- 
sonable prudence  that  a  liability  to  the  injured  person  might 
arise.  In  such  case  the  duty  of  the  assured  is  performed  if 
he  gives  notice  within  a  reasonable  time  after  the  injury 
presents  an  aspect  suggestive  of  a  possible  claim  for 
damages." 

An  indemnity  policy  contained  the  following  clause :  "Upon 
the  occurrence  of  an  accident  the  insured  shall  give  immedi- 
ate written  notice  thereof,  with  the  fullest  information  ob- 
tainable, to  the  agent  by  whom  this  policy  has  been  counter- 
signed, or  to  the  company's  home  office.  If  a  claim  is  made 
on  account  of  such  accident,  the  insured  shall  give  like  notice 
thereof  with  full  particulars."  In  order  to  maintain  an  action 
on  a  policy  containing  such  a  clause,  the  insured  is  bound  to 
give  notice  of  both  the  accident  and  claim  for  damages  as 
and  when  by  the  terms  of  the  contract  he  agreed  to  do  so. 
Conditions  for  notice  of  the  event  insured  against  such  as 
these"  are  common  in  policies  for  most  kinds  of  insurance. 
They  are  nothing  new  or  misleading.  Such  stipulations, 
when  contained  in  the  policy,  are  recognized  as  valid,  and 
must  be  complied  with  before  recovery  can  be  had,  if  within 
the  power  of  the  insured.  Failure  by  the  insured  to  observe 
this  condition  precedent  is  failure  to  perform  the  contract 
on  his  part. 

,An  automobile  manufacturing  corporation  held  an  in- 
demnity policy  against  accidents  or  injuries  to  third  persons 
by  its  motor  cars  in  testing  them  or  before  they  were  sold. 
This  policy  contained  the  foregoing  clause  as  to  notice,  and 
obligated  the  insurance  company  to  settle  or  defend  litiga- 
tion and  hold  the  insured  harmless  when  due  notice  of  service 
and  of  suit  was  given.  In  an  action  on  the  policy  the  insurance 
company  claimed  that  notice  of  an  accident,  for  which  suit  was 
begun,  had  not  been  served  until  over  three  months  after  the 


INDEMNITY  INSURANCE  163 

injury,  and  that  in  the  meantime  one  of  the  testers  involved  in 
the  injury  had  left  the  automobile  company's  employ  and  gone 
to  unknown  parts,  and  it  had  suffered  from  the  neglect  to 
give  notice.  The  insured's  chief  inspector  of  mechanical  parts, 
who  had  supervision  over  the  testers,  and  its  head  tester, 
both  learned  of  the  accident  and  claim  from  the  injured 
party's  attorney  within  two  or  three  days  after  the  event, 
with  data  as  to  time,  place  and  parties.  They  were  persons 
holding  positions  of  trust  and  responsibility.  They  made  no 
report  to  any  of  their  superiors.  Their  excuse  was  that  the 
two  testers  involved  denied  the  claim.  Notice  to  them  was 
held  notice  to  the  insured,  notwithstanding  their  belief  in  the 
testers'  denial,  and  the  insurance  company  was  discharged 
from  liability  on  the  policy.  Oakland  Motor  Co.  v.  American 
Fidelity  Co.,  (1916),  190  Mich.  74,  155  N.  W.  729. 

It  appeared  that  the  insurance  company  did  take  up  the 
burden  of  defense  of  the  claim  under  assurances  and  in  the 
belief  that  the  insured  first  learned  of  the  matter  when  sum- 
mons was  served  on  it,  and  only  learned  the  facts  as  to  the 
previous  knowledge  of  the  insured's  agents  when  they  were 
brought  out  on  the  trial,  whereupon  counsel  raised  the  ob- 
jection and  insisted  that  the  insurance  company  had  been 
both  misled  and  handicapped  by  the  long  delay  in  notifying  it, 
during  which  time  it  had  no  opportunity  to  see  the  parties 
and  investigate  before  litigation  was  initiated,  and  the  tester 
who,  it  was  claimed,  drove  the  offending  automobile,  had  left 
the  automobile  company's  employ  and  afterwards  disap- 
peared, for  which  reasons  counsel  proposed  to  turn  the  de- 
fense over  to  attorneys  of  the  insured  and  retire  from  the 
case.  It  was  held  that  its  assuming  the  burden  of  the  de- 
fense would  not  constitute  a  waiver  so  long  as  the  insurance 
company  had  no  knowledge  of  the  insured's  previous  in- 
formation and  forfeiture  of  its  rights  under  the  policy;  but 
whatever  question  that  situation  might  otherwise  have  pre- 
sented, the  insurance  company  was  fully  protected  by  an 
agreement  which  provided :  "That  all  acts  of  the  'parties 
hereto  with  reference  to  the  conduct  of  the  defense  of  said 


164  AUTOMOBILE  INSURANCE  LAW 

case  shall  be  considered  as  done  without  prejudice  to  their 
respective  rights  under  said  automobile  policy."  Oakland 
Motor  Co.  v.  American  Fidelity  Co.,  (1916),  190  Mich.  74, 
155  N.  W.  729. 

What  is  a  reasonable  time  for  giving  notice  must  be  de- 
termined by  the  court  as  a  question  of  law  when  the  facts 
are  not  in  dispute.  Oakland  Motor  Co.  v.  American  Fidelity 
Co.,  (1916)  190  Mich.  74,  155  N.  W.  729,  holding  that  three 
months  was  an  unreasonable  time  to  delay  notifying  the 
insurance  company.  But  if  the  lapse  of  time  between  the  oc- 
currence of  an  accident  and  the  notice  thereof  is  not  of 
such  duration  as  would  justify  the  court  in  disposing  of  the 
issue  as  a  matter  of  law  it  should  be  submitted  to  a  jury  for 
proper  determination.  Schambelan  v.  Preferred  Accident  & 
Insurance  Co.,  (1916),  62  Pa.  Superior  Ct.  445. 

Under  policy  provisions  that  "the  assured  upon  the  oc- 
currence of  an  accident  shall  give  immediate  written  notice 
thereof  with  the  fullest  information  obtainable"  to  the  com- 
pany, and  that  "if  claim  is  made  on  account  of  such  acci- 
dent the  assured  shall  give  like  notice  thereof,"  the  insured  is 
not  barred  from  recovery  on  the  policy  by  the  fact  that  he 
did  not  give  immediate  notice  of  the  accident,  where  he  had  no 
knowledge  of  a  person  injured  therein,  and  he  gave  immedi- 
ate notice  as  soon  as  he  heard  that  a  person  had  been  injured 
and  that  a  claim  was  made.  Schambelan  v.  Preferred  Acci- 
dent Insurance  Co.,  (1916),  62  Pa.  Superior  Ct.  44!5.  The 
purpose  of  a  provision  in  an  insurance  policy  insuring  against 
loss  or  damage  caused  by  vehicles  of  the  insured,  which  re- 
quires the  insured  to  give  written  notice  to  the  insurer  "im- 
mediately upon  the  occurrence  of  an  accident  *  *  *  with  the 
fullest  information  obtainable  at  the  time,"  is  to  enable  the 
insurer  to  ascertain  all  the  facts  and  circumstances  surround- 
ing the  accident  while  such  facts  are  fresh  in  the  memory 
of  witnesses,  so  that  the  insurer  may  be  prepared  either  to 
defend  or  to  make  settlement  if  any  claim  is  thereafter 
made  or  suit  brought  for  damages  resulting  from  personal 
injuries.  Forbes  Cartage  Co.  v.  Frankfort  Marine,  Acci- 


INDEMNITY  INSURANCE  165 

dent  &  Plate  Glass  Insurance  Co.  {1915)  195  111.  App.  75. 
Under  an  insurance  policy  insuring  against  loss  or  damage 
caused  by  vehicles  of  the  insured,  where  an  accident  occurs 
and  the  insured  as  a  result  of  its  own  investigations  is  satis- 
fied that  no  claims  for  personal  injuries  can  be  successfully 
made,  and  such  insured  does  not  immediately  notify  the  in- 
surer of  the  accident  as  required  by  the  policy,  the  insured 
thereby  elects  to  carry  the  risk  itself  and  absolves  the  in- 
surer from  liability.  Forbes  Cartage  Co.  v.  Frankfort  Marine, 
Accident  &  Plate  Glass  Insurance  Co.,  (1915)  195  111.  App.  75. 

§143.    Waiver  of  Condition  as  to  Notice  of  Accident — A 

failure  to  give  notice  within  the  time  required  of  an  accident 
in  respect  of  which  suit  is  subsequently  brought  on  the  policy 
will  be  a  breach  of  the  condition  requiring  such  notice,  un- 
less the  insurance  company  waives  the  breach  or  estops  it- 
self from  denying  the  performance  of  the  condition.  Lee  v. 
Casualty  Co.  of  America,  (1916),  90  Conn.  202,  96  Atl.  952. 
The  court  said:  "The  purpose  of  the  notice  of  an  accident  is 
the  same  in  casualty  insurance  as  the  notice  of  a  loss  by  fire 
in  fire  insurance  and  of  the  death  of  an  insured  in  life  in- 
surance. Being  for  the  benefit  of  the  insurer,  it  miay  be 
waived  by  it  in  the  one  case  as  well  as  the  others.  It  is  well 
settled  that  the  notice  of  loss  by  fire  and  death  may  be 
waived.  The  same  principle  is  involved  in  the  one  case  as  in 
the  others.  There  may  be  more  reason  why  an  insurer 
would  insist  upon  the  notice,  and  less  likelihood  that  it  would 
waive  it,  in  the  case  of  a  casualty  than  in  the  other  cases.  It 
is  a  stipulation  upon  which  it  may  insist,  but  one  which  it 
may  waive." 

Waiver  may  be  implied  as  well  as  expressed.  It  appeared, 
in  an  action  on  an  indemnity  policy,  which  contained  no  pro- 
vision that  the  policy  should  be  forfeited  by  a  breach  of  the 
condition  as  to  immediate  notice,  that  notice  of  the  casualty 
was  given  by  the  plaintiff  and  received  by  the  company's 
agent,  but  not  immediately  after  the  casualty,  as  required  by 
the  policy.  The  company,  knowing  this,  and  without  claim- 
ing a  breach  of  the  conditons  of  the  policy,  proceeded  at 


166  AUTOMOBILE  INSURANCE  LAW 

once,  and  continued  for  nearly  two  months,  to  attempt  to 
make  a  settlement  of  the  claim  of  the  injured  party.  It 
then  called  upon  the  plaintiff  for  further  information  and 
proof  as  to  the  casualty,  and  two  months  later  called  upon 
him  for  the  papers  in  the  action  which  had  been  commenced 
by  the  injured  person  against  the  plaintiff,  and  shortly  be- 
fore the  trial  of  that  case  returned  the  papers  to  him  with 
the  information  that  it  took  no  interest  in  the  case,  that  it 
had  cancelled  the  policy  as  of  the  date  of  issue,  and  there 
was  no  insurance  in  force  at  the  time  of  the  casualty.  It  was 
held  that  from  these  facts  a  very  strong  inference  would 
arise  that  the  company  had  intended  to  waive  the  plaintiff's 
breach  of  the  condition  respecting  immediate  notice ;  and  that 
if  such  was  the  fact,  the  company  could  not  afterwards  re- 
voke the  waiver  and  insist  upon  a  breach  of  the  condition  in 
order  to  relieve  it  from  liability.  Lee  v.  Casualty  Co.  of  Amer- 
ica, (1916),  90  Conn.  202,  96  Atl.  952. 

§144.  Amount  of  Recovery. — Under  a  clause  in  a  liability 
policy  limiting  liability  in  case  of  the  bodily  injury  or  death  of 
one  person  to  $5,000,  a  policy  holder  cannot  recover  more 
than  that  sum,  although  a  judgment  may  have  been  recovered 
against  him  in  a  much  larger  sum  on  a  claim  within  the  policy, 
and  the  policy  contains  a  further  limit  of  $10,000  where  more 
than  one  person  has  been  injured,  subject  to  the  same  limit 
for  each  person.  McClung  v.  Pennsylvania  Taximeter  Cab 
Co.,  (1916),  25  Pa.  Dist.  583. 

An  indemnity  policy  insuring  against  "damages  on  account 
of  bodily  injuries"  limited  the  company's  liability  "on  account 
of  an  accident  resulting  in  such  injuries  to  one  person"  to 
$5,000,  and  "subject  to  the  same  limit  for  each  person,  the 
corporation's  total  liability  on  account  of  any  one  accident  re- 
sulting in  injuries  to  more  than  one  person"  to  $10,000. 
Damages  werevrecovered  against  the  insured  by  two  persons, 
husband  and  wife,  for  injuries  to  the  wife,  and  paid.  The 
insurance  company,  in  an  action  on  the  policy,  conceded  that 
it  was  bound  to  indemnify  the  insured  for  both  these  re- 
coveries, subject  to  the  limitation  expressed  in  the  policy. 


INDEMNITY  INSURANCE  167 

The  only  question  was  whether  the  limit  of  liability  was 
$5,000  or  $10,000.  It  was  held  the  limit  was  $5,000  under  the 
condition  quoted,  this  clause,  by  the  use  of  the  word  "such" 
injuries  referring  only  to  bodily  injuries,  and  limiting  the  indem- 
nity, "no  matter  how  many  may  recover  because  of  such  injury, 
since,  as  in  this  case,  more  than  one  person  may  claim  and  se- 
cure damages  for  bodily  injuries  to  the  one  person."  The  latter 
part  of  the  condition,  which  increases  the  limit  where  more 
than  one  person  is  injured  as  a  result  of  any  one  accident,  is 
distinctly  stated  to  be  "subject  to  the  same  limit  for  each 
person,"  that  is,  to  the  $5,000  limit  for  each  person  receiving1 
bodily  injuries.  Klein  v.  Employers'  Liability  Assurance  Com- 
pany, (1918),  9  Ohio  App.  241 

§145.  Same;  Bond  Premium  Not  Covered. — An  automobile 
company  doing  business  in  the  State  of  New  York  issued  a 
liability  policy  to  a  foreign  corporation.  Its  automobile  ran 
over  a  man,  killing  him.  His  administrator  brought  suit  and 
attached  the  insured  company's  property  in  New  York  State. 
The  insured  bonded  the  attachment,  and  sued  the  insurance 
company  to  recover,  and  had  judgment  for  the  amount  of 
the  premium  paid  by  it  for  the  bond  and  the  amount  paid  by 
it  to  the  sheriff  for  poundage.  The  policy  provided  that  the 
insurance  company  should  defend  suits,  "pay  all  costs  and  ex- 
penses incident  to  the  investigation,  adjustment  and  settle- 
ment of  claims,  and  all  costs  taxed  against  the  assured  in  any 
legal  proceedings  defended  by  the  company."  It  was  held, 
on  appeal,  that  the  insured  could  not  recover  the  bond  prem- 
ium and  poundage,  for,  while  it  would  not  have  been  put  to 
this  expense  had  there  been  no  accident,  and  thus  no  suit, 
the  expense  was  occasioned  wholly  by  the  fact  that  it  was  a 
non-resident ;  and  the  bonding  of  the  attachment  merely 
caused  the  substitution  of  one  form  of  security  for  another, 
the  attachment  not  /affecting  the  merits  of  the  controversy 
in  the  suit.  Green  River  Distilling  Co.  v,  Massachusetts 
Bonding  &  Insurance  Co.  (1920)— N.  Y.  App.  Div.— 185  ,N.  Y. 
Supp.  307. 


168  AUTOMOBILE  INSURANCE  LAW 

§146.  Same;  Insured's  Costs  After  Insurer's  Failure  to 
Defend  Suit. — A  clause  in  an  indemnity  policy  obligated  the 
insurance  company  to  "pay  all  costs  incurred  with  the  com- 
pany's written  consent."  In  an  action  by  the  insured  against 
the  company  for  attorney's  fees  and  costs  incurred  by  him  in 
the  defense  of  a  suit  for  damages  for  the  death  of  a  child 
caused  by  the  operation  of  the  automobile,  which  was  subse- 
quently settled,  .the  court  said:  "The  company  having  re- 
fused to  defend,  as  it  had  obligated  itself  to  do,  it  was  in- 
cumbent upon  Schwartz  (the  insured)  to  conduct  his  own 
defense.  Since  the  question  of  Schwartz's  liability  for  the 
death  of  the  child  is  not  now  in  question,  because  he  is  not 
now  suing  for  the  amount  paid  as  damages,  but  for  attorney's 
fees  for  which  he  is  liable,  he  is  clearly  entitled  to  recover, 
and  it  was  not  necessary  that  the  fee  be  paid  to  enable  him 
to  recover,  but  when  he  established  that  he  was  obligated  to 
pay,  and  that  his  fee  is  reasonable,  the  liability  contemplated 
by  the  policy  had  arisen,  and  his  cause  of  action  accrued." 
And  in  such  circumstances  the  insurance  company's  consent 
in  writing  to  incur  the  fee  was  not  essential.  Royal  Indemnity 
Co.  v.  Schwartz  (1914)— Tex.  Civ.  App.— 172  S.  W.  581. 

Where  the  policy  provides  that  the  insurer  is  to  defend  any 
damage  suit  against  the  insured,  covered  by  the  policy, 
whether  groundless  or  not,  the  insurer,  on  failure  to  defend 
a  suit,  notwithstanding  it  was  groundless  and  defeated,  will 
be  liable  to  the  insured  for  the  costs  and  expenses  of  the  de- 
fense. Green-Robbins  Co.  v.  Pacific  Surety  Co.,  (1918),  37 
Cal.  App.  540,  174  Pac.  110. 

§147.  Provision  Against  Waiver  of  Conditions  by  Com- 
pany's Officers. — Where  a  condition  in  a  liability  policy  ex- 
pressly provides  that  no  provision  of  the  policy  shall  be 
"waived  or  altered,  except  by  endorsement  hereon  signed  by 
the  president  or  the  secretary,"  a  parol  promise  by  the  vice- 
president  and  general  manager  of  the  company  to  a  policy 
holder  to  save  him  harmless  from  liability  under  a  possible 
judgment,  although  the  amount  might  exceed  the  limit  of 
liability  in  the  policy,  is  void  as  in  conflict  with  an  essential 


INDEMNITY  INSURANCE  169 

condition  of  the  policy.  McClung  v.  Pennsylvania  Taximeter 
Cab  Co.  (1916)  25  Pa.  Dist.  583. 

§148.     Effect  of  Settlement  by  Insurer  on  Rights  of  Insured. 

— An  automobile  indemnity  contract  has  been  said  to  be  one 
where,  being  properly  notified  of  an  accident  or  damage 
covered  by  the  policy,  the  insurance  company  agrees  to  step 
into  the  assured's  shoes  so  far  as  handling  the  claim  or  effect- 
ing settlement  or  defending  suits  is  concerned;  and  the  at- 
titude that  it  requires  an  assured  to  take  when  a  claim  is 
made  against  him  is  rather  one  of  an  agent  to  the  company 
than  a  principal  for  whom  the  company  is  acting.  Besides, 
the  contract  is  to  handle  only  such  business  as  is  brought 
against  the  assured,  and  none  of  the  provisions  of  the  policy 
can  be  construed  as  giving  the  insurance  company  power  to 
settle  any  claims  which  the  assured  may  have  against  some 
third  party. 

Therefore,  where  an  insured  had  a  collision  with  another 
automobile,  clearly  caused  by  negligence  of  the  driver  of  the 
latter,  but  the  driver  of  the  other  car  threatened  to  sue  the 
insured  and  the  insurance  company's  adjuster  settled  with 
the  driver  of  the  other  car  for  $200,  this  settlement  which 
the  insured  had  no  hand  in,  he  being  forbidden  by  his  policy 
to  interfere  with  negotiations  for  the  settlement  of  claims, 
did  not  bind  him  and  estop  him  from  asserting  a  claim  for 
damages  to  his  automobile  against  the  driver  of  the  other 
car.  Burnham  v.  Williams  and  Quinn  (1917)  198  Mo.  App. 
18,  194  S.  W.  751. 

§149.  Effect  of  References  to  Insurance  in  Negligence  Ac- 
tions.— The  general  rule  that  it  is  improper,  in  a  negligence 
action,  to  bring  to  the  knowledge  of  the  jury  information  that 
the  defendant  is  insured  against  the  injury  for  which  the  ac- 
tion is  brought  is  well  settled.  The  rule  applies  alike  to  testi- 
mony introduced  and  to  remarks  of  counsel.  Akin  v.  Lee 
(1912)  206  N.  Y.  20,  99  N.  E.  85,  reversing  145  App.  Div.  950; 
Griessel  v.  Adeler  (1918)  183  App.  Div.  816,  171  N.Y.  Supp.  183 ; 
Tincknell  v.  Ketchman  (1912)  78  Misc.  (N.  Y.)  419,  139  N.  Y. 


170  AUTOMOBILE  INSURANCE  LAW 

Supp.  620;  Allen  v.  Arnink  Auto  Renting  Co.  v.  United  Trac- 
tion Co.  (1915)  91  Misc.  (N.  Y.)  531,  154  N.  Y.  Supp.  934; 
Koran  v.  Altman  (1919)  176  N.  Y.  Supp.  433;  Livingston  v. 
Dole  (1918)  184  Iowa  1340,  167  N.  W.  639;  Scranton  Gas  & 
Water  Co.  tf.  Weston  (1916)  63  Pa.  Superior  Ct.  570;  Conover 
v.  Bloom  (1921)— Pa.— 112  Atl.  752;  Blaback  v.  Blacksher 
(1914)  11  Ala.  App.  545,  66  So.  863;  Carter  v.  Walker  (1914) 
—Tex.  Civ.  App.— 165  S.  W.  483. 

It  is  also  reversible  error  to  permit  counsel  to  ask  jurors  in 
such  actions  if  they  are  connected  with  an  insurance  com- 
pany. Martin  v.  Lilly  (1919)  188  Ind.  139,  121  N.  E.  443; 
Schmidt  v.  Schalm  (1913)  2  Ohio  App.  268. 

The  New  York  Court  of  Appeals  has  held  it  to  be  reversible 
error,  in  an  action  to  recover  for  injuries  to  a  plaintiff  who 
was  run  into  by  an  automobile,  to  admit  testimony  that  the 
defendant  stated,  in  a  conversation  after  the  accident,  that  he 
was  insured  against  such  accidents.  The  court  said :  "Such 
evidence,  almost  always,  is  quite  unnecessary  to  the  plaintiff's 
case  and  its  effect  cann'ot  but  be  highly  dangerous  to  the  de- 
fendant's ;  for  it  conveys  the  insidious  suggestion  to  the  jurors 
that  the  amount  of  their  verdict  for  the  plaintiff  is  immate- 
rial to  the  defendant.  It  was  a  highly  improper  attempt  on 
the  plaintiff's  part  to  inject  a  foreign  element  of  fact  into  his 
case,  which  might  affect  the  jurors'  minds,  if  in  doubt  upon 
the  merits,  by  the  consideration  that  the  judgment  would  be 
paid  by  an  insurance  company.  While,  frequently,  in  the  ex- 
ercise of  the  authority  conferred  upon  this  court,  we  dis- 
regard technical  errors,  when  we  see  that  they  do  not  affect 
the  merits  of  the  controversy,  the  error  committed  in  this 
case  is  of  too  grave  a  nature  to  be  put  aside  as  merely  tech- 
nical. In  repeated  instances,  judgments  have  been  reversed 
for  its  commission  and  counsel  must  take  notice  that  we  shall 
adhere  to  our  rule  and  that  we  shall  order  a  new  trial  in  all 
cases  where,  in  such  actions,  a  verdict  may  have  been  in- 
fluenced by  the  consideration  of  such  unauthorized  evidence." 
Akin  v.  Lee  (1912)  206  N.  Y.  20,  99  N.  E.  85,  reversing  145 
App.  Div.  950. 

In  an  action  for  injuries   from  a   collision  with  the   de- 


INDEMNITY  INSURANCE  171 

fendant's  automobile  the  defendant  was  asked  on  cross  ex- 
amination, and  was  allowed,  over  objection,  to  answer,  whether 
he  had  not  told  counsel  he  would  have  to  refer  to  his  in- 
surance company.  Subsequently  the  defendant's  answer  was 
stricken  out,  and  the  objection  to  the  question  sustained.  A 
verdict  for  the  plaintiff  was  set  aside  on  the  ground  that  the 
fact  that  the  defendant  was  insured  against  any  judgment 
which  might  be  obtained  against  him  was  brought  to  the  at- 
tention of  the  jury.  It  was  unsuccessfully  urged  by  the  plain- 
tiff that  evidence  otherwise  competent  cannot  be  excluded 
because  it  incidentally  infringes  upon  the  general  rule  above 
stated,  and  that  in  this  case  the  question  was  asked,  not  for 
the  purpose  of  showing  insurance  protection,  but  to  establish 
that,  when  the  defendant  was  charged  with  causing  the  plain- 
tiff's injuries,  he  failed  to  deny  that  charge,  thereby  tacitly 
admitting  his  connection  with  the  accident.  It  was  on  this 
theory  that  the  trial  court  at  first  permitted  the  question  to 
be  answered,  but  upon  reflection  it  reversed  the  ruling  and 
sustained  the  objection.  There  still  remained,  however,  the 
fact  that  the  question  had  been  put  in  the  jury's  presence. 
On  this  point  the  court  said:  "The  question  of  fact  as  to 
whether  or  not  defendant  caused  the  accident  under  con- 
sideration was  exceedingly  close  and  it  is  impossible  to  say 
that  the  statement  that  defendant  understood  he  had  an  in- 
surance behind  him  embodied  in  the  question  did  not  in- 
fluence the  jury  in  rendering  the  verdict  which  it  did.  While 
it  is  true  that  the  answer  was  stricken  out  and  the  objection 
to  the  question  sustained,  the  prohibited  matter  was  by  the 
question  brought  squarely  before  the  jury  and  might  have 
had  considerable  weight  in  their  determination."  Tincknell 
v.  Ketchman  (1912)  78  Misc.  (N.  Y.)  419,  139  N.  Y.  Supp.  620. 
The  offending  party  cannot  escape  the  effect  of  the  testi- 
mony given  by  him  as  to  the  defendant's  statement  to  him 
that  he  had  insurance  on  the  car  on  the  ground  of  his  ignor- 
ance of  the  baneful  effect  it  would  probably  have  upon  the 
jury.  "He  must  be  given  credit  for  common  sense  and  at 


172  AUTOMOBILE  INSURANCE  LAW 

least  a  modicum  of  knowledge  of  human  nature."    Carter  v. 
Walker  (1914)— Tex.  Civ.  App.— 165  S.  W.  483. 

In  an  action  by.  the  owner  of  an  automobile  for  damages 
done  by  a  third  person  to  the  car,  the  fact  that  he  carries 
insurance  on  the  automobile  against  accident  and  that  he  has 
been  paid  in  part,  or  even  in  full,  by  the  insurance  company  for 
the  damages  for  which  he  is  suing,  is  not  admissible  for  the 
purpose  of  reducing  the  damages  recoverable  for  the  de- 
fendant's negligence.  Hill  v.  Condon  (1915)  14  Ala.  App.  332, 
70  So.  208.  But  see  Magee  v.  Vaughan  (1914)  212  Fed.  278, 
134  C.  C.  A.  388,  holding  that  evidence  of  statements  by  the 
defendant  as  to  being  insured  was  admissible  to  show  owner* 
ship,  where  that  was  in  doubt,  or  such  control  over  the  auto- 
mobile as  would  place  a  liability  on  the  defendant  from  which 
he  had  protected  himself  by  insurance,  and  that  the  fact  that 
it  might  be  inadmissible  on  other  grounds  and  tend  to  preju- 
dice the  minds  of  the  jury  in  arriving  at  a  verdict  was  not 
sufficient  reason  for  excluding  it. 

§150.  Same;  Error  Cannot  be  Cured  by  Instructions  to 
Jury. — The  effect  of  such  testimony  or  remarks  of  counsel  is 
not  cured  by  an  instruction  to  the  jury  to  disregard  it.  Tinck- 
nell  v.  Ketchman  (1912)  78  Misc.  (N.  Y.)  419  139  N.  Y.  Supp. 
620;  Martin  v.  Lilly  (1919)  188  Ind.  139,  121  N.  E.  443;  Aqua 
Contracting  Co.  v.  United  Rys.  Co.  of  St.  Louis  (1918)  Mo. 
App.  203  S.  W.  481;  Schmidt  v.  Schalm  (1919)  2  Ohio  App. 
268. 

No  amount  of  admonition  to  the  jury  can  remove  the  effect 
of  such  testimony,  because  it  cannot  remove  the  knowledge 
that  the  suit  was  not  one  between  citizens,  .but  between  a 
citizen  and  a  corporation.  Carter  v.  Walker  (1914) — Tex.  Civ. 
App.— 165  S.  W.  483. 

In  an  action  for  injuries  to  the  plaintiff's  automobile,  due 
to  the  defendant's  negligence,  the  trial  court  was  held  within 
its  judicial  discretion  in  granting  the  plaintiff's  motion  for  a 
new  trial  for  misconduct  of  the  defendant's  counsel  in  in- 
quiring of  a  witness  for  the  plaintiff  whether  the  latter  car- 
ried collision  insurance,  although  the  court  had  sustained 


INDEMNITY  INSURANCE  173 

an  objection  to  the  question,  had  instructed  the  jury  to  dis- 
regard it,  and  had  reprimanded  counsel.  The  trial  judge  had 
before  him  not  only  the  witnesses  but  the  jury,  and  was 
judged  better  able  than  the  appellate  court  to  determine 
whether  the  effect  of  the  poison  so  injected  into  the  case  by 
the  defendant's  counsel  was  still  present  with  the  jury.  Aqua 
Contracting  Co.  v.  United  Rys.  Co.  of  St.  Louis  (1918) — Mo. 
App.— 203  S.  W.  481. 

in  an  action  for  damages  against  the  owner  of  an  auto- 
mobile intimations  by  counsel  that  some  insurance  company 
is  interested  in  preventing  a  recovery,  as  by  remarks  in  the 
presence  of  prospective  jurors  being  examined  on  voir  dire 
that  doctors  would  probably  be  called  upon  to  testify  as  to 
the  physical  condition  of  the  defendant,  both  by  the  plaintiff 
and  the  insurance  company,  no  insurance  company  being  a 
party  to  the  action,  are  prejudicial  to  the  rights  of  the  de- 
fendant and  highly  improper.  They  are  not  cured  by  the 
trial  court's  sustaining  an  objection  to  the  remark,  and  in- 
structing the  jury  to  entirely  disregard  any  remark  made 
about  an  insurance  company  being  connected  with  the  case. 
The  court  said :  "The  true  defendant  was  thereby  made  to 
bear  the  burden  of  whatever  prejudice  existed  in  the  minds  of 
the  jurors  against  insurance  companies.  This  was  manifestly 
unfair  to  him,  as  under  a  policy  of  casualty  insurance  the 
liability  of  the  insurer  is  usually  limited  to  a  fixed  amount. 
A  recovery  in  excess  of  this  amount  in  an  accident  case  must 
be  borne  by  the  insured.  Thus  the  defendant  might  have  been 
greatly  prejudiced  by  such  a  remark.  Moreover,  an  insur- 
ance company,  if  there  be  one  that  is  in  anywise  interested 
in  the  outcome  of  the  case  that  is  not  a  party  to  the  action  and 
does  not  have  the  right  to  p'ead  or  defend  in  the  action,  nor 
the  right  to  show  the  nature  and  extent  of  its  obligations  to 
the  defendant,  should  not  be  prejudiced  in  its  rights  by  such 
remarks.  Ths  rights  of  the  parties  to  an  action  should  be  de- 
termined by  the  pleadings  and  the  evidence  in  the  case  and 
not  by  some  extraneous  consideration.  Such  a  remark  as 
that  referred  to,  if  made  purposely,  could  have  no  other  object 


174  AUTOMOBILE  INSURANCE  LAW 

than  to  prejudice  the  jury  against  the  defendant,  and  is  obvi- 
ously improper."  Schmidt  v.  Schalm  (1913)  2  Ohio  App. 
268. 

It  has,  however,  been  held  that  slight  references  made  dur- 
ing the  trial  to  a  casualty  company,  which  were  stricken  by 
the  court  from  the  record,  and  the  jury  admonished  to  pay  no 
attention  to  them  and  no  harm  appearing  to  have  resulted 
therefrom,  did  not  constitute  material  error.  Stafford  v.  Noble 
(1919)  105  Kan.  219,  182  Pac.  650. 

And  where  the  trial  court  nullified  the  effect,  if  prejudice 
entered  into  the  jury's  verdict  because  of  the  improper  refer- 
ence to  insurance,  by  reducing  the  verdict  from  '$7,500  to 
$5,000,  the  error  was  not  considered  on  appeal.  McNamara  v. 
Leipzig  (1917)  180  App.  Div.  515. 

Where  the  defendant  does  not  take  any  steps  whatever  in 
the  matter  of  trying  to  nullify  or  render  harmless  an  im- 
proper remark  of  an  attorney  by  calling  upon  the  court,  by 
motion  or  otherwise,  to  make  any  ruling  in  the  premises,  and 
no  ruling  is  made,  error  will  not,  on  appeal,  be  predicated 
upon  the  improper  remark.  Norris  v.  West  (Ind.  App  1921) 
129  N.  E.  862;  Stafford  v.  Noble  (1919)  105  Kan.  219. 

§151.  Same ;  Defendant  Cannot  Complain  if  Reference  First 
Made  by  Him. — If  the  defendant  himself  injects  into  the  case 
a  reference  to  insurance,  for  which  the  plaintiff  is  in  no  way 
responsible,  the  defendant  cannot  thereafter  take  advantage  of 
his  own  error  and  complain  of  a  subsequent  question  as  to  in- 
surance by  the  plaintiff's  counsel.  Ward  v.  Teller  Co.  (1915)  60 
Colo.  47,  153  Pac.  219;  Gianini  v.  Cerini  (1918)  100  Wash.  687, 
171  Pac.  1007;  Kellner  v.  Christiansen  (1919)  169  Wis.  390,  172 
N.  W.  796 

So,  a  defendant  cannot  complain  of  questions  as  to  whether 
she  was  insured  when  she  has  opened  up  the  matter  herself 
by  pleading  and  relying  upon  a  release  purporting  to  have 
been  executed  to  her,  but  which  was,  in  fact,  negotiated  by 
the  indemnity  company.  Beatty  v.  Palmer  (1916) — Ala. — 
71  So.  422. 


Chapter  XVI 

Public  Service  Vehicle  Bonds 

§152.     Requirement  by   Statute  or  Ordinance  of   Bonds   by   Operators 

of  Public   Service  Vehicles  Valid. 

§153.     Immaterial  that  Bonds  May  be  Beyond  Reach  of  Some  Owners. 
§154.     Requirement  of  Surety  or  Insurance  Company  Bond  or  Policy 

Valid. 

§155.    Routing. 

§156.     Liability  for  Lessee  Or  Delegate  Operating  Bus. 
§157.     Extent  of   Surety's  Liability. 

§152.  Requirement  by  Statute  or  Ordinance  of  Bonds  by 
Operators  of  Public  Service  Vehicles  Valid. — The  requirement 
of  the  execution  of  bonds  by  operators  of  public  service  buses 
is  a  valid  exercise  of  the  police  power  and  within  the  author- 
ity of  the  state  and  its  governmental  agencies,  municipal 
corporations.  Willis  v.  City  of  Fort  Smith,  (1916),  121  Ark. 
606,  182  S.  W.  275,  ($2,500);  Hazleton  v.  City  of  Atlanta 
(1916),  144  Ga.  775,  87  S.  E.  1043,  93  S.  E.  202,  ($5,000  held 
not  unreasonable)  ;  Huston  v.  City  of  Des  Moines,  (1916),  176 
Iowa  455,  156  N.  W.  883,  ($2,000  held  clearly  reasonable)  ; 
Ex  parte  Counts,  (1915),  39  Nev.  61,  153  Pac.  93  ($10,000  for 
first  jitney,  and  $5,000  for  each  additional  bus)  ;  City  of  Mem- 
phis v.  State  ex  rel.  Ryals,  (1915),  133  Tenn.  83,  179  S.  W.  651 
($5,000);  Ex  parte  Boyle,  (1915),  78  Tex.  Cr.  1,  179  S.  W. 
1193,  ($5,000;  $2,500  for  each  injury  to  person  or  property)  ; 
State  v.  Seattle  Taxicab  &  Transfer  Co.,  (1916),  90  Wash. 
416,  156  Pac.  837  ($2,500) ;  Salo  v.  Pacific  Coast  Casualty  Co  , 
(1917),  95  Wash.  109,  163  Pac.  384;  Singer  v.  Martin,  (1917), 
96  Wash.  231,  164  Pac.  1105;  Nelson  v.  Pacific  Coast  Casualty 
Co.,  (1917),  96  Wash.  43,  164  Pac.  594;  Commonwealth  v. 
Slocum,  (1918),  230  Mass.  180,  119  N.  E.  687  ($1,000  not  un- 
duly burdensome  or  unreasonable)  ;  Commonwealth  v.  The- 
berge,  (1918),  231  Mass.  386,  121  N.  E.  30  ($2,500  not  un- 

175 


176  AUTOMOBILE  INSURANCE  LAW 

reasonable);  In  re.  Cardinal,  (1915),  170  Cal.  348,  150  Pac. 
348,  ($10,000  aggregate;  $5,000  for  any  one  person  killed 
or  injured,  $1,000  for  injury  or  destruction  of  any  property)  ; 
Greene  v.  City  of  San  Antonio,  (Tex.  Civ.  App.,  1915),  178 
S.  W.  6;  Auto  Transit  Co.  v.  City  of  Ft.  Worth,  (Tex.  Civ. 
App.,  1916),  182  S.  W.  685;  City  of  Providence  v.  Paine, 
(1918),  41  R.  I.  333,  103  Atl.  786  ($500  for  each  passenger 
authorized  to  be  carried  in  the  bus)  ;  West  v.  Asbury  Park, 
(1916)— N.  J.  L.— 99  Atl.  190;  Ex  parte  Dickey,  (1915),  76 
W.  Va.  576,  85  S.  E.  781;  Ex  parte  Sullivan  (1915)  77  Tex. 
Cr.  72,  178  S.  W.  537;  City  of  Dallas  v.  Gill  (1918)— Tex.  Civ. 
App.— 199  S.  W.  1144;  Ex  parte  Parr  (1918)  82  Tex.  Crim. 
App.  525,  200  S  W.  404;  Darrah  v.  Lion  Bonding  &  Surety 
Co.,  (1918)— Tex.  Civ.  App.—,  200  S.  W.  1101;  Nolen  v. 
Riechman,  (1915),  225  Fed.  812  ($5,000  for  each  jitney  operat- 
ed). "There  can  be  no  doubt  that  the  safe  operation  of  an 
automobile  depends  largely  on  the  caution,  skill  and  respon- 
sibility of  its  driver.  Any  measure  that  will  tend  to  secure 
careful,  competent  men  as  drivers  of  jitneys  will  promote 
the  safety  of  passengers  and  the  general  public.  It  is  at 
once  apparent  that  the  requirement  of  a  bond  would  have  this 
effect.  No  one  would  be  willing  to  become  surety  for  a 
reckless  or  incompetent  driver,  and  the  fact  that  he  was 
under  bond,  with  his  responsibility  fixed,  would,  of  itself, 
make  the  driver  more  careful.  It  would  appear,  therefore, 
that  the  city  could  properly  require  the  giving  of  a  bond  in 
the  reasonable  exercise  of  its  police  power."  Lutz  v.  City 
of  New  Orleans,  (1916)  235  Fed.  979. 

§153.  Immaterial  that  Bonds  May  be  Beyond  Reach  of 
Some  Owners. — The  fact  that  such  bonds  are  denied  to,  or 
are  not  within  the  power  of,  those  who  are  financially  ir- 
responsible does  not  show  that  the  act  requiring  them  is 
unreasonable  or  unconstitutional  as  prohibitive.  State  v. 
Seattle  Taxicab  &  Transfer  Co.,  (1916)*  90  Wash.  416,  156 
Pac.  837;  Hadfield  v.  Lundin  (1917)  98  Wash.  657. 

§154.     Requirement  of  Surety  or  Insurance  Company  Bond 


PUBLIC  SERVICE  VEHICLE  BONDS  177 

or  Policy  Valid. — Some  ordinances  provide  fqr  a  surety  com- 
pany bond  or  a  policy  of  insurance  executed  by  a  company 
authorized  to  do  business  in  the  state.  Ex  parte  Counts 
U915)  39  Nev.  61,  153  Pac.  93.  Such  a  requirement  does  nit 
render  the  provision  invalid.  In  re  Cardinal,  (1915)  170  Cal. 
519,  150  Pac.  348.  The  court  said:  "We  know  of  no  constitu- 
tional right  that  one  has  to  give  any  particular  kind  of  se- 
curity. A  legislative  body  having  the  right  to  require  the 
giving  of  security  necessarily  has  the  right  to  prescribe  the 
kind  that  shall  be  given,  with  the  limitation  always,  of  course, 
that  its  provisions  in  this  regard  shall  not  be  unreasonable, 
or  based  upon  any  other  consideration  than  its  conclusion  as 
to  what  is  necessary  for  the  protection  of  those  concerned." 
To  the  same  effect  is  City  of  New  Orleans  v.  Le  Blanc  (1916) 
139  La.  112,  71  So.  248.  No  one  has  ever  successfully  ques- 
tioned in  the  Washington  courts  the  power  of  the  legislature 
to  make  provisions  restricting  the  character  of  the  surety  to 
surety  companies  licensed  to  do  business  in  the  state.  State 
v.  Seattle  Taxicab  &  Transfer  Co.  (1916)  90  Wash.  416,  156 
Pac.  837. 

The  requirement  in  a  municipal  ordinance  that  a  jitney 
bond  be  signed  by  a  surety  company  does  not  violate  the  lib- 
erty of  contract  of  the  owner  of  the  machine.  Lutz  v.  City 
of  New  Orleans,  (1916),  235  Fed.  979. 

The  objection  that  no  surety  company  will  execute  the 
bond  required  unless  the  principal  deposits  with  it  $5,000  in 
cash,  or  collateral  security,  is  not  sufficient  to  make  the  or- 
dinance invalid.  Personal  surety  might  make  the  same  re- 
quirement. Considering  the  greater  desirability  of  corporate 
surety  in  any  case,  a  superiority  sometimes  recognized  by 
the  law  itself,  it  can  hardly  be  said  that  the  provision  that  the 
bond  must  be  signed  by  a  surety  company  is  more  onerous 
than  would  be  a  requirement  of  personal  surety  of  equal  re- 
sponsibility. Lutz  v.  City  of  New  Orleans  (1916)  235  Fed. 
979. 

In  the  Pennsylvania  courts,  however,  a  requirement  of 
an  ordinance  that  the  bond  must  be  furnished  by  a  surety 


178  AUTOMOBILE  INSURANCE  LAW 

company,  and  forbidding  the  deposit  of  cash,  or  a  certified 
check  or  municipal  bonds,  or  the  acceptance  of  individual 
freeholders  of  unquestioned  financial  responsibility,  has  been 
held  unreasonable  and  void.  Jitney  Bus  Assn.  of  Wilkes- 
barre  v.  City  of  Wilkesbarre  (1917)  256  Pa.  462,  100  Atl.  954. 

§155.  Routing. — Under  the  Washington  act  (Rem.  Code, 
§  §  5562-37,  5562-38),  requiring  a  permit  and  bond  for  the  oper- 
ation of  motor  vehicles  for  hire  in  cities  of  the  first  class,  it 
is  held  that  liability  on  their  bond  for  injuries  received  due  to 
negligent  operation  is  limited  to  injuries  which  occur  within 
the  city  limits,  in  view  of  the  dominant  purpose  of  the  act 
to  regulate  only  operation  in  cities  of  the  first  class  and  to 
require  no  permits  for  cars  operating  outside  of  such  limits. 
Bartlett  v.  Laphier  (1917)  94  Wash.  354,  162  Pac.  533.  But 
the  Washington  statute  is  not  inapplicable  to  motor  buses  be- 
cause they  do  not  operate  on  fixed  routes,  or  because  they 
charge  different  rates  of  fare  for  different  distances,  or  be- 
cause they  sometimes  carry  passengers  across  the  boundary 
lines  of  the  city.  The  prohibition  is  against  carrying  pas- 
sengers within  a  city  of  the  first  class  in  the  vehicles  named, 
and  is  operative  so  long  as  the  passenger  is  being  carried 
therein  in  the  prohibited  vehicles,  no  matter  over  what  route, 
for  what  fare,  or  to  what  destination.  Puget  Sound  Traction, 
Light  &  Power  Co.  v.  Grassmeyer,  (1918), — Wash. — ,  173 
Pac.  504. 

Where  the  bond  requires  a  change  of  route  to  be  consented 
to  by  the  surety,  the  surety  will  not  be  liable  for  injuries 
caused  by  the  bus  while  being  driven  off  the  prescribed  route 
without  its  permission.  Motor  Car  Indemnity  Exchange  v. 
Lilienthal,  (1921),— Tex.  Civ.  App.— ,  229  S.  W.  703. 

Deviations  from  the  proscribed  route  may,  however,  be 
authorized  by  the  ordinance  under  which  the  bus  is  operated. 
Bond  v.  Holloway,  (1920),— Cal.  App.—,  188  Pac.  577. 

A  passenger  automobile  is  being  operated  "in  the  service  of 
a  common  carrier"  within  the  terms  of  a  liability  bond,  as  re- 
quired by  the  Wisconsin  statute,  not  merely  while  it  is  carry- 


PUBLIC  SERVICE  VEHICLE  BONDS  179 

ing  passengers  on  its  route,  but  while  it  is  running  to  a  repair 
shop  to  receive  the  repairs  necessary  to  enable  it  to  continue 
its  service  as  a  common  carrier.  Ehlers  v.  Automobile  Liabili- 
ty Co.,  (1919),  169  Wis.  494,  173  N.  W.  325. 

§156.     Liability  for  Lessee  or  Delegate  Operating  Bus. — 

Under  an  ordinance  requiring  a  jitney  bus  owner  to  give  a 
bond,  and,  in  effect,  providing  that  if  ah  owner's  servant  puts 
another  man  in  his  place  without  authority  from  the  owner, 
the  owner  shall  suffer  for  such  substitute's  negligence  rather 
than  the  passengers  and  public,  who  have  a  right  to  assume 
that  the  car  would  not  be  intrusted  to  any  one  to  carry  on  the 
business  unless  he  was  the  employee  of  the  owner,  the  owner 
and  his  surety  were  held  liable  for  injuries  to  a  pedestrian  on 
a  sidewalk,  injured  by  the  defective  condition  of  the  bus  when 
operated  by  the  driver  for  one  who  operated  the  car  for  the 
owner  on  a  percentage  basis,  with  a  guarantee  of  $2.50  a  day, 
where  the  ordinance  requires  operation  on  specified  schedules 
under  penalty  of  forfeiture  of  the  owner's  license,  so  that 
the  operator  on  a  percentage  basis  had  to  get  somebody  to 
relieve  him  at  meal  times.  Western  Indemnity  Co.  v.  Berry, 
(1918) —Tex.  Civ.  App.—,  200  S.  W.  245. 

Under  the  Washington  statute  the  surety  is  liable  for  in- 
juries resulting  from  a  machine  for  which  the  owner  has  se- 
cured the  permit,  though  it  is  operated  by  a  lessee.  Any 
contract  of  the  licensee  tending  to  shift  liability  from  himself 
and  his  bondsman  and  at  the  same  time  allow  him  to  reap 
a  benefit  either  in  rental  or  a  share  of  the  profits  must  neces- 
sarily be  construed  as  a  device  for  evading  the  effect  of  the 
law.  The  permit  and  bond  required  by  the  statute  cover  a 
specific  machine,  and  any  contract  which  would  defeat  the 
statute  would  necessarily  be  void  as  against  public  policy. 
McDonald  v.  Lawrence,  (1918),  100  Wash.  215,  170  Pac.  576. 

The  Washington  courts  hold  that  the  surety's  liability  to 
one  who  has  been  injured  does  not  depend  upon  whether  the 
principals  on  the  bond  are  owners  of  the  bus.  The  suretyship 


180  AUTOMOBILE  INSURANCE  LAW 

concerns  the  car  and  its   operation  and  not  its   ownership. 
Homer  v.  Kilmer,   (1921),— Wash.— ,  196  Pac.  646. 

§157.  Extent  <rf  Surety's  Liability.— Under  the  Wash- 
ington statute  the  surety  is  liable  to  each  person  injured  for 
the  full  amount  of  the  damages,  up  to  the  extent  of  the  pen- 
alty on  the  bond.  Salo  v.  Seattle  Taxicab  &  Transfer  Co., 
(1917),  95  Wash.  109,  163  Pac.  384;  Nelson  v.  Pacific  Coast 
Casualty  Co.,  (1917),  96  Wash.  43,  164  Pac.  594. 

In  Pennsylvania,  however,  it  is  held  that  a  requirement 
that  "the  bond  shall  be  a  continuing  liability,  notwithstanding 
any  recovery  thereon,"  if  taken  to  mean  that  while  the  bond 
purported  to  be  in  the  penal  sum  of  $2,500,  yet  after  recovery 
to  that  amount,  the  obligors  should  continue  to  be  liable  for 
other  and  additional  amounts  without  limit,  was  held  to  be 
clearly  unreasonable,  since  no  surety  could  properly  be  asked 
to  undertake  such  an  indefinite  and  unlimited  responsibility. 
Jitney  Bus  Assn.  of  Wilkesbarre  v.  City  of  Wilkesbarre, 
(1917),  256  Pa.  462,  100  Atl.  954. 

Where  a  bus  operator  filed  two  bonds,  each  in  the  sum  re- 
quired by  the  city  ordinance,  $1,000,  it  was  held  that  the 
liability  of  the  sureties  was  not  restricted  to  $500  each,  and 
in  the  event  of  a  judgment  for  more  than  $2,000  against  the 
operator,  one  surety  was  liable  to  the  full  amount  of  his 
bond,  though  the  other  surety  had  paid  $900  in  compromise 
of  the  claim  against  him.  Western  Indemnity  Co.  v.  Murray 
1919),— Tex.  Civ.  App.— ,  208  S.  W.  696.  The  court  said: 
"The  rule  of  contributon  might  apply  as  between  appellant 
and  the  Maryland  Casualty  Company,  if  the  amount  of  de- 
fault had  not  been  more  than  $1,000,  but  where,  as  in  this 
case,  there  are  two  separate  and  distinct  bonds,  each  sup- 
ported by  its  own  m'onthly  payments  of  premium,  the  as- 
sured, the  person  injured,  must  be  held  to  be  entitled  to  re- 
cover upon  both  up  to  the  amount  of  the  bonds  if  the  liability 
and  default  is  that  much." 

Under  the  Rhode  Island  statute  the  liability  of  the  sureties 
is  unconditional,  and  they  may  be  proceeded  against  alone. 


PUBLIC  SERVICE  VEHICLE  BONDS  181 

where  the  bond  is  joint  and  several ;  and  the  right  of  action 
on  the  bond  is  not  limited  to  passengers  in  the  car  of  the 
licensee,  but  is  also  for  the  benefit  of  pedestrians  or  persons 
in  automobiles  other  than  that  of  the  licensee.  City  of  Provi- 
dence v.  Paine,  (1918),  41  R.  I.  333,  103  Atl.  786. 

The  California  Supreme  Court  holds  that  a  bond  may  be 
properly  construed,  though  the  obligation  therein  does  not 
expressly  run  in  favor  of  third  persons,  to  include  the  re- 
quirements of  an  ordinance  that  it  be  so  conditioned  so  that 
the  surety  company  may  be  properly  joined  with  the  insured 
in  an  action  for  injuries  by  the  operation  of  the  bus.  Milliron 
v.  Dittman,  (1919),  — Cal.— ,  181  Pac.  779.  But  in  Calvitt  v. 
Mayor,  etc.,  of  Savannah,  (1919),  — Ga.  App.— ,  101  S.  E.  129, 
it  is  held  that  the  surety  is  not  a  proper  party  to  an  action 
against  the  bus  driver;  and  a  judgment  against  the  principal 
is  not  conclusive  as  to  the  liabilty  of  the  surety,  but  only  prima 
facie  evidence  thereof. 

The  New  Jersey  statute  does  not  authorize  the  court  to 
marshal  the  fund  payable  under  the  policy  for  division  among 
those  injured  in  an  accident.  The  statute  provides  that  be- 
fore an  injured  person  can  have  recourse  to  the  policy  he  must 
recover  final  judgment  aganst  the  bus  owner ;  and  until  he 
has  final  judgment  he  has  no  lien  on  the  policy.  The  statute 
merely  proposes  to  give  those  who  suffer  injury  through  the 
bus  owner  a  special  fund  from  which  to  collect,  in  case  the 
bus  owner  is  financially  unable  to  respond  in  damages.  What 
the  Legislature  has  said,  in  effect,  is  that  the  policy  should 
be  for  the  benefit  of  every  person  suffering  loss,  damage,  or 
injury  who  may  establish  his  claim  by  judgment  against  the 
bus  owner  and  proceed  to  collect  from  the  insurance  company 
in  accordance  with  the  law  respecting  judgments  and  execu- 
tions. Had  it  intended  that  the  amount  of  the  policy  should 
be  shared  proportionately  by  all  persons  who,  within  the  time 
fixed  by  the  statute  of  limitations,  might  sue  &nd  'recover 
judgment  against  the  bus  owner,  it  would  have  said  so,  or  it 
would  have  provided  that  the  policy  should  be  for  the  benefit 
of  every  person  injured,  to  the  extent  of  $5,000  per  person. 


182  AUTOMOBILE  INSURANCE  LAW 

To  hold  that  the  policy  is  for  the  benefit  of  all  injured  persons 
pro  rata  would  make  it  necessary  for  the  insurance  company 
to  ascertain,  before  it  could  safely  pay  any  one,  how  many 
persons  might  have  claims  thereon,  whether  growing  out  of 
one  accident  or  several  accidents  occurring  after  the  policy 
was  written,  and  what  the  total  amount  of  judgments  which 
might  be  presented  would  be. 

The  situation  under  the  statute  is  that  every  person  injured 
by  a  licensed  auto  bus  may  be  said  to  have  an  inchoate  lien 
upon  the  insurance  policy,  which  inchoate  right  can  ripen  into 
an  actual  lien  only  by  the  recovery  of  final  judgment  against 
the  bus  owner  and  service  of  notice  of  the  judgment  on  the 
insurance  company.  In  the  absence  of  any  statutory  pro- 
vision to  the  contrary,  such  liens  have  priority  in  the  order  in 
which  they  mature  and  are  presented  to  the  insurance  com- 
pany. Turk  v.  Goldberg,  (1920),  — N.  J.  Eq.— ,  109  Atl.  732. 

The  bond  under  the  Washington  statute  covers  injuries  to 
the  property  or  business  of  passengers  as  well  as  injuries  to 
their  persons.  Singer  v.  Martin,  (1917),  96  Wash.  231,  164 
Pac.  1105.  The  loss  recoverable  under  the  New  Jersey  sta- 
tute is  limited  to  such  as  results  to  a  third  party  from  bodily 
injury  or  death,  and  does  not  cover  damages  to  an  automo- 
bile. Gillard  v.  Manufacturers'  Casualty  Insurance  Co., 
(1919)  — N.  J.— ,  107  Atl.  448,  reversing  92  N.  J.  L.  146,  104 
Atl.  709. 

Under  the  Washington  statute  parents  may  recover  on  the 
bond  for  the  death  of  a  minor  child.  Bruner  v.  Little  (1917) 
97  Wash.  319,  166  Pac.  1166. 

Where  the  policy  is  limited  to  the  particular  car  named 
therein,  the  insurer  is  not  liable  for  an  injury  caused  by  a 
different  car  operated  by  the  same  owner.  Downs  v.  Georgia 
Casualty  Co.,  (1921),  271  Fed.  310.  And  failure  to  prove 
that  the  injury  was  caused  by  the  automobile  covered  by  the 
bond  will  bar  recovery  against  the  surety  in  an  action  on  the 
bond.  Motor  Car  Indemnity  Exchange  v.  Lilienthal,  (1921) — 
Tex.  Civ.  App.— ,  229  S.  W.  703. 


TABLE  OF  CASES 

(REFERENCES  ARE  TO  SECTIONS) 

A 

Section 

Adams  v.  White  Bus  Line.  (1921)— Cal.— 195  Pac.  389 74 

Akin  v.  Lee  (1912)  206  N.  Y.  20;  99  N.  E.  85 149 

Allen  &  Arnink  Auto  Renting  Co.  v.  United  Traction  Co.  (1915) 

91  Misc.  531 ;  154  N.  Y.  Supp.  934 73, 149 

American  Automobile  Ins.  Co.  v.  Fox.  (1919) — Tex.  Civ.  App. — 

218  S.  W.  92 113 

American  Automobile  Ins.  Co.  v.  Palmer  (1913)  174  Mich.  295; 

140  N.  W.  557 116 

American  Automobile  Ins.  Co.  v.  Struwe  (1920) — Tex.  Civ.  App. 

—218  S.  W.  534 130 

American  Automobile  Ins.  Co.  v.  United  Rys.  Co.  (1918)  200 

Mo.  App.  317;  206  S.  W.  257 73 

American  Automobile  Ins.  Co.  v.  Watts  (1914)  12  Ala.  App. 

518;  67  So.  758 21a 

American  Fidelity  Co.  v.  Bleakley  (1912)  157  Iowa  442;  138 

N.  W.  508 116 

American  Indemnity  Co.  v.  Fellbaum  (1920) — Tex.  Civ.  App. — 

225  S.  W.  873 138 

Aqua  Contracting  Co.  v.  United  Railways  Co.  of  St.  Louis 

(1918)— Mo.  App.—  ;  203  S.  W.  481 150 

Automobile  Ins.  Co.  of  Hartford  v.  Guaranty  Securities  Corp. 

(1917)  240  Fed.  222 22 

Automobile  Securities  Co.  v.  Atlas  Assurance  Co.  (1919)  67 

Pitts.  Legal  Journal  303 76 

Auto  Transit  Co.  v.  City  of  Fort  Worth  (1916)— Texas  Civ. 

App.— 182  S.  W.  685 152 

B 

Bartlett  v.  Lanphier  (1917)  94  Wash.  354;  162  Pac.  533 155 

Beatty  v.  Palmer  (1916)  196  Ala.  67 ;  71  So.  422 151 

Bell  v.  American  Insurance  Co.  (1921)— Wis.— 181  N.  W.  733. ...    12,16, 

107,  111 
Berryman   v.    Maryland   Motor   Car   Insurance    Co.    (1918)    199 

Mo.  App.  503;  204  S.  W.  738 64 

Bigus  v.  Pacific  Coast  Casualty  Co.  (1910)   145  Mo.  App.  170; 

129  S.  W.  982  91 

Birmingham  Ry.,  Light  and  Power  Co.  v.  Aetna  Accident  & 

Liability  Co.  (1913)  184  Ala.  601 ;  64  So.  44 74 

Blaback  v.  Blacksher  (1914)  11  Ala.  App.  545;  66  So.  863 149 

Bogle  Ex  Parte,  (1915)  78  Tex.  Crim.  1 ;  179  S.  W.  1193 152 

Bond  v.  Hollo  way  (1920)— Cal.  App.— 188  Pac.  577 155 

British  &  Foreign  Marine  Ins.  Co.  v.  Cummings    (1910)    113  MdV 

350 ;  76  Atl.  571 49,  58 

Brock  v.  Travelers  Ins.  Co.  (1914)  88  Conn.  308;  91  Atl.  279....         123 
Browne  v.  Commercial  Union  Ins.  Co.  (1916)  30  Cal.  App.  547; 

158  Pac.  765 20,  29,  77 

Bruner  v.  Little  (1917)  97  Wash.  319;  166  Pac.  1166 157 

Burnham  v.  Williams  (1917)  198  Mo.  App.  18;  194  S.  W.  751. ..  .115, 148 
Buxton  v.  International  Indemnity  Co.  (1920) — Cal.  App. — 191 

Pac.  84 27,  93,  99,  102 

183 


184  AUTOMOBILE  INSURANCE  LAW 

(REFERENCES  ARE  TO  SECTIONS) 

C  Section 

California   Insurance   Co.   v.   Bishop    (1920) — Tex.   Civ.   App. — 

228  S.  W.  1010... 81 

California  Insurance  Co.  v.  Eads   (1919)— Tex.  Civ.  App.— 209 

S.  W.  216  54 

Callahan  v.  London  &  Lancashire   Fire   Insurance  Co.   (1917) 

98  Misc.  589;  163  N.  Y.  Supp.  322. 48,  95,  100 

Calvitt    v.     Mayor,    etc.,     of     Savannah     (1919) — Ga.     App. — 101 

S.  E.  129 157 

Campbell  v.  London  &  Lancashire   Indemnity  Co.   (1917)    168 

N.  Y.  Supp.  300 127 

Cantw'ell  v.   General  Accident,   Fire   &   Life  Assurance   Corp. 

(1917)  205  111.  App.  335 106 

Cardinal,  In  re,  (1915)  170  Cal.  519;  150  Pac.  348. 152, 154 

Carter  v.  Walker  (1914)— Tex.  Civ.  App.— 165  S.  W.  483 149,150 

Cass  v.  Lord  (American  Central  Ins.  Co.)   (1920) — Mass. — 128 

N.  E.  716 3,  9,  10,  17,  31,  81 

Chapin  v.  Ocean  Accident  &  Guarantee  Co.  (1919)  96  Neb.  213; 

147  N.  W.  465  . . 142 

Chepakoff  v.  National   Ben  Franklin   Fire   Ins.   Co.   (1916)   97 

Misc.  330;  161  N.  Y.  Supp.  283 99 

Chisholm  v.   Royal   Insurance    Co.    (1917)   225    Mass.   428;    114 

N.  E.  715 34 

Christison  v.  St.  Paul  Fire  &  Marine  Insurance  Co.  (1917)  138 

Minn.  51 ;  163  N.  W.  980 44 

City  of  Dallas  v.  Gill  (1918)— Tex.  Civ.  App.— 199  S.  W.  1144...  152 
City  of  Memphis  v.  State  (1915)  133  Tenn.  83 ;  179  S.  W.  651 ....  152 
City  of  Providence  v.  Paine  (1918)  41  R,  I.  333;  103  AtL  786. ...  .152, 157 
Clark  v.  London  Assurance  Corp.  (1921)— Nev.— 195  Pac.  809...  24 
Cohen  v.  Chicago  Bonding  &  Insurance  Co.  (1920) — Minn. — 178 

N.   W.   485 112 

Collins  v.  Standard  Accident  Ins.  Co.   (1916)   170  Ky.  27;   185 

S.  W.  112 133 

Commercial   Union   Assurance    Co.    v.    Hill    (1914) — Tex.    Civ. 

App.— 167  S.  W.  1095 63,67 

Commercial  Union  Assurance  Co.  v.  Lyon  (1915)  17  Ga.  App. 

441;  87  S.  E.  761... 72 

Commonwealth  v.  Slocum  (1918)  230  Mass.  180;  119  N.  E.  687..  152 
Commonwealth  v.  Theberge  (1918)  231  Mass.  386;  121  N.  E.  30  152 

Conover  v.  Bloom  (1920)— Pa.— ;  112  Atl.  752 149 

Cottingham  v.  Maryland  Motor  Car  Ins.  Co.  (1915)   168  N.  C. 

259;  84  S.  E.  274 72a 

Counts,  Ex  Parte,  (1915)  39  Nev.  61 ;  153  Pac.  93 152, 154 

Cranston  v.  California  Ins.  Co.  (1919)  94  Oregon  369;  185  Pac. 

292    7, 35,  71 

Crowell  v.  Maryland  Motor  Car  Insurance  Co.  (1915)  169  N.  C. 

35;  85  S.  E.  37;  Ann.  Cas.  1917  D.  50 ...12,14,63 

D 

Darrah  v.  Lion  Bonding  &  Surety  Co.  (1918) — Tex.  Civ.  App. — 

200  S.  W.  1101 152 

Dawedoff  v.  Hooper  (1916)— Tex.  Civ.  App.— 190  S.  W.  522....         74 


TABLE  OF  CASES  185 

(REFERENCES  ARE  TO  SECTIONS)  Section 

Day  v.  St.  Paul  Fire  &  Marine  Insurance  Co.  (1920) — Wash. — 

189  Pac.  95 35,  52, 58 

Delafield  v.  London  &  Lancashire  Fire  Ins.  Co.  (1917)  177  App. 

Div.  477;  164  N.  Y.  Supp.  221 90 

Dickey,  Ex  Parte,  (1915)  76  W.  Va.  576;  85  S.  E.  78 152 

Dimmick  v.  Aetna  Insurance  Co.  (1919)  213  111.  App.  467 12,68 

Dimmick  v.  Illinois  Automobile  Fire  Insurance  Exchange 

(1920)  216  111.  App.  543 68 

Dougherty  v.  Insurance  Co.  of  North  America  (1910)  19  Pa. 

Dist.  547;  38  Pa.  Co.  Ct.  119 106 

Downs  v.  Georgia  Casualty  Co.  (1921)  271  Fed.  310 157 

Drewv.  American  Automobile  Ins.  Co.  (1918) — Tex.  Civ.  App. — 

207  S.  W.  547  20,21 

Dunn  v.  First  National  Fire  Ins.  Co.  (1918)  14  Schuylkill 

Legal  Record  389  27,65 

E 

Eberhardt  v.  Federal  Insurance  Co.   (1913)   14  Ga.  App.  340; 

80  S.  E.  856 40,  42a,  42b 

Ehlers  v.  Gold  (1919)  169  Wis.  494 ;  173  N.  W.  325 78, 155 

Elder  v.  Federal  Insurance  Co.  (1913)  213  Mass.  389;  100  N.  E. 

655  61 

Emerson  v.  Western  Automobile  Indemnity  Assn.  (1919)  105 

Kan.  242;  182  Pac.  647 115,126 

F 

Farber  v.  American  Automobile  Insurance  Co.  (1915)  191  Mo. 

App.  307;  177  S.  W.  675 55,  83,  85 

Federal  Insurance  Co.  v.  Hiter  (1915)  164  Ky.  743;  176  S.  W. 

210  89, 102 

Federal  Insurance  Co.  v.  Munden  (1918) — Tex.  Civ.  App. — 203 

S.  W.  917 99 

Felgar  v.  Home  Insurance  Co.  of  New  York  (1917)  207  111. 

App.  492  87 

Fischer  Auto  &  Service  Co.  v.  General  Accident,  Fire  &  Life 

Assurance  Corp.  (1917)  8  Ohio  App.  176 141 

Fodor  v.  National  Liberty  Insurance  Co.  of  America  (1919)  175 

N.  Y.  Supp.  112  7,27 

Forbes  Cartage  Co.  v.  Frankfort  Marine,  etc.,  Ins.  Co.  (1915) 

195  111.  App.  75 25,142 

Ford  v.  Stevens  Motor  Car  Co.  (1920)— Mo.  App.— 220  S.  W.  980  8 

Frost  v.  Heath  (1918)  211  111.  App.  454 100 

Fullerton  v.  United  States  Casualty  Co.  (1918)  184  Iowa  219; 

167  N.  W.  700 15,  19,  119,  138 

G 

Gaffey  v.   St.   Paul  Fire   &   Marine   Insurance   Co.   (1917)   221 

N.  Y.  113 ;  116  N.  E.  778 37, 45 

Gallagher  v.  American  Alliance  Ins.  Co.  (1921) — 111.  App. — 24,25,26 

Gianini  v.  Cerini  (1918)  100  Wash.  687;  171  Pac.  1007 151 


186  AUTOMOBILE  INSURANCE  LAW 

(REFERENCES  ARE  TO  SECTIONS) 

Section 

Gibson  v.  G/jorgia  Life  Insurance  Co.  (1915)  17  Ga.  App.  43;  86 

S.  E.  335 108 

Gillard  v.  Manufacturers  Casualty  Insurance  Co.  (1919) — N.  J. 

Law— 107  Atl.  448;  reversing-  92  N.  J.  L.  146;  104  Atl.  709. ...  157 
Glaser  v.  Williamsburg  City  Fire  Ins.  Co.  (1921) — Ind.  App. — 

125  N.  E.  787 26,27,28 

Globe  &  Rutgers  Fire  Ins.  Co.  v.  Adams  (1921) — Mo.  App. — 

230  S.  W.  345..'. 73 

Goodman  v.  Georgia  Life  Ins.  Co.  (1914)  189  Ala.  130;  66  So. 

649  130, 132 

Gould  v.  Brock  (1908)  221  Pa.  38;  69  Atl.  1122 140 

Gould  v.  St.  Paul  Fire  &  Marine  Ins.  Co.  (1919)— Wash.— 177 

Pac.  787  72a 

Graham  v.  Insurance  Co.  of  North  America  (1915)  220  Mass. 

230;  107  N.  E.  915 114 

Green  River  Distilling  Co.  v.  Massachusetts  Bonding  &  Insur- 
ance Co.  (1920)— App.  Div.— 185  N.  Y.  Supp.  307 145 

Green-Robbins  Co.  v.  Pacific  Surety  Co.  (1918)  37  Cal.  App. 

540;  174  Pac.  110 146 

Greene  v.  City  of  San  Antonio  (1915) — Tex.  Civ.  App. — 178 

S.  W.  6 152 

Griessel  v.  Adeler  (1918)  183  App.  Div.  816;  171  N.  Y.  Supp.  183.  149 

Gross  v.  Germania  Fire  Ins.  Co.  (1920)  29  Pa.  Dist.  Ct.  879 37,40 

Gunn  v.  Globe  &  Rutgers  Fire  Ins.  Co.  (1919)  24  Ga.  App. 

615 ;  101  S.  E.  691 94 

H 
Haas  Tobacco  Co.  v.  American  Fidelity  Co.   (1919)  226  N.  Y. 

343 ;  123  N.  E.  755,  affirming  165  N.  Y.  Supp.  230 141 

Hadfield  v.  Lundin  (1917)  98  Wash.  657;  168  Pac.  516 153 

Hamilton  v.  Fireman's  Fund   Ins.   Co.    (1915) — Tex.   Civ.   App. — 

177  S.  W.  173 61,71 

Hancock  v.   Hartford   Fire   Ins.   Co.   (1913)   81    Misc.    159;    142 

N.   Y.   Supp.   352 22 

Hanover  v.  Georgia  Life  Ins.  Co.  (1914)   141  Ga.  389;  81  S.  E. 

206    108 

Hardenbergh    v.    Employers'    Liability    Assurance    Co.    (1913)    80 

Misc.  522;  141  N.  Y.  Supp.  502 106 

Harris  v.  American  Casualty  Co.  (1912)  83  N.  J.  Law  641 107 

Harris  v.   St.  Paul  Fire   &  Marine  Ins.  Co.   (1920)    126  N.  Y. 

Supp.    118    56 

Hart  v.  Springfield  Fire  &  Marine  Ins.  Co.  (1914)  136  La.  114; 

66  So.  558 36,  39, 42 

Hartford   Fire   Ins.   Co.  v.  Wimbish    (1913)    12   Ga.   App.   712; 

78  S.  E.  265 87 

Hartigan   v.   Casualty   Co.   of  America    (1919)   227   N.   Y.   175; 

124  N.  E.  789,  reversing  165  N.  Y.  Supp.  894,  which  affirmed 

161  N.  Y.  Supp.  145 13,120 

Hazelton  v.  City  of  Atlanta   (1916)  144  Ga.  775;  87  S.  E.  1043; 

93  S.  E.  202 152 

Healy  v.   Stuyvesant   Insurance   Co.   (1918)   72   Pa.   Super.   Ct. 

168 69 

Hill  v.  Condon  (1915)  14  Ala.  App.  332;  70  So.  208... 149 


TABLE  OF  CASES  187 

(REFERENCES  ARE  TO  SECTIONS) 

Section 

Hoffman   v.   Prussian   National   Ins.   Co.    (1918)    181   App.   Div. 

412;  168  N.  Y.  Supp.  841 83 

Home  Insurance  Co.  v.  Walter  (1921)— Tex.  Civ.  App.— 230 

S.  W.  723 40,42a 

Hopkins  v.  American  Fidelity  Co.  (1916)  91  Wash.  680;  158 

Pac.  535  136 

Horan  v.  Altman  (1919)  176  N.  Y.  Supp.  433 149 

Homer  v.  Kilmer  (1921)— Wash— 196  Pac.  646 156 

Huston  v.  City  of  Des  Moines  (1916)  176  Iowa  455;  156  »N.  W. 

883    152 

J 
Jitney  Bus  Association   of  Wilkesbarre  v.  Wilkesbarre    (1917) 

256  Pa.  462;  100  Atl.  954 154,  157 

Johnson    v.    Home    Mutual    Insurance    Co.    (1921) — Iowa — 181 

N.  W.  244  5. 103 

Jones  v.  Orient  Insurance   Co.   (1914)    184  Mo.  App.  402;   171 

S.  W.  28 40 

K 
Kansas  City  Regal  Auto  Co.  v.  Old  Colony  Ins.  Co.  (1917)  1% 

Mo.  App.  255;   195  S.  W.  579 100 

Kansas    City    Regal   Auto    Co.   v.    Old   Colony   Ins.    Co.    (1915) 

187  Mo.  App.  514 95,99 

Kellner  v.  Christiansen  (1919)  169  Wis.  390 ;  172  N.  W.  796 151 

Kennelly  v.  London  Guarantee  &  Accident  Co.  (1918)  184  App. 

Div."  1 ;  171  N.  Y.  Supp.  423 134 

Klein    v.    Employers'    Liability    Assurance    Co.    (1918)    9   Ohio 

App.  241    144 

Kress  v.  Insurance  Co.  of  Pennsylvania  (1916)  18  Luzerne  Legal 

Register  278    61 

Kunkle  v.   Union   Casualty  Ins.   Co.    (1916)   62  Pa.   Super.   Ct. 

114    14, 122 

L 

Lee  v.  Casualty  Co.  of  America   (1916)  90  Conn.  202;  96  Atl. 

952    143 

Lepman  v.  Employers'  Liability  Assurance  Co.   (1912)   170  111. 

App.  379   44, 106 

Letendre     v.  Automobile  Insurance  Co.  of  Hartford   (1921) — 

R.  L— 112  Atl.  783 45,47 

Levin    v.   New    England    Casualty   Co.    (1916)    97   Misc.    7;    160 

N.   Y.   Supp.   1041;    101    Misc.   409;    166   N.   Y.    Supp.    1055; 

affirmed  (1919)  187  App.  Div.  935;  174  N.  Y.  Supp.  910 134 

Livingstone  v.  Dole  (1918)  184  Iowa  1340;  167  N.  W.  639 149 

Locke  v.  Royal  Insurance  Co.  (1915)  220  Mass.  202;  107  N.  E. 

911    51, 59 

Lorando  v.  Gethro  (1917)  228  Mass.  181;  117  N.  E.  185 128,130 

Lummus    v.    Fireman's    Fund    Ins.    Co.    (1914)     167'   N.    C.    654; 

83    S.   E.   688 51,66 

Lutz  v.  City  of  New  Orleans  (1916)  235  Fed.  978 152, 154 

M 
McAleenan  v.  Massachusetts  Bonding  &  Insurance  Co.   (1916) 

173  App.  Div.  100;  159  N.  Y.  Supp.  401;  affirmed  219  N.  Y. 

563;  114  N.  E.  114 , 135 


188  AUTOMOBILE  INSURANCE  LAW 

(REFERENCES  ARE  TO  SECTIONS) 

Section 

McAleenan  v.  Massachusetts  Bonding  &  Insurance  Co.  (1920) 

190  App.  Div.  657;  180  N.  Y.  Supp.  287 139 

McClung  v.  Pennsylvania  Taximeter  Cab  Co.  (1916)  25  Pa. 

Dist.  583  12, 126, 137, 144, 147 

McConihe  v.  St.  Paul  Fire  &  Marine  Ins.  Co 86 

McDonald  v.  Lawrence(  1918)  100  Wash.  215;  170  Pac.  576 156 

McNamara  v.  Leipzig  (1917)  180  App.  Div.  515;  167  >N.  Y.  Supp. 

981  150 

Magee  y.  Vaughan  (1914)  212  Fed.  278;  134  C.  C.  A.  388 149 

Mannheimer  Bros.  v.  Kansas  Casualty  &  Surety  Co.  (1920) — 

Minn.— 180  N.  W.  229 123 

Marmon  Chicago  Co.  v.  Heath  (1917)  205  111.  App.  605 14, 62 

Martin  v.  Lilly  (1919)  188  Ind.  139;  121  N.  E.  443 149,150 

Maryland  Motor  Car  Ins.  Co.  v.  Haggard  (1914) — Tex.  Civ. 

App.— 168  S.  W.  1011 74 

Mayor,  Lane  &  Co.  v.  Commercial  Casualty  Ins.  Co.  (1915) 

169  App.  Div.  772;  155  N.  Y.  Supp.  75*. 61,118,127,134 

Messersmith  v.  American  Fidelity  Co.  (1919)  187  App.  Div.  35, 

175  N.  Y.  Supp.  169 123, 125 

Michigan  Commercial  Ins.  Co.  v.  Wills  (1914)  57  Ind.  App. 

256;  106  N.  E.  725 87,  88 

Miller  v.  Commercial  Union  Assurance  Co.  (1912)  69  Wash. 

529;  125  Pac.  782 50 

Mississippi  Electric  Co.  v.  Hartford  Fire  Ins.  Co.  (1913)  105 

Miss.  767;  63  So.  231 30 

More  v.  Continental  Insurance  Co.  (1915)  169  App.  Div.  914; 

154  N.  Y.  Supp.  1134 28, 100 

Morrison  v.  Royal  Indemnity  Co.  (1917)  180  App.  Div.  709; 

167  N.  Y.  Supp.  731 77.,  123, 138 

Motor  Car  Indemnity  Exchange  v.  Lilienthal  (1921) — Cal. 

App.— 188  Pac.  577 155, 157 

Movrles  v.  Boston  Insurance  Co.  (1917)  226  Mass.  426;  115 

N.  E.  666 2,3,4 

N 
Navickis   v.   Fireman's    Fund    Insurance    Co.    (1920) — Mass. — 126 

N.   E.  388 77 

Neal,  Clark  &  Neal  Co.  v.  Liverpool  &  London  &  Globe  Ins. 

Co.  (1917)  178  App.  Div.  730;  165  N.  Y.  Supp.  204 92,97 

Nelson  v.  Pacific  Coast  Casualty  Co.  (1917)  96  Wash.  43;  164 

Pac    594  152  157 

New  Orleans  v.'  Le 'Blanc  0916)  139  La.'  113;' 71  So'.' 248! !!"'.'.!'.      '  154 

Nolen  v.  Eiechman    (1915)    225  Fed.  812 152 

Norris  v.  West  (1921)— Ind.  App.— 129  N.  E.  862 150 

o 

O'Connor  v.  Maryland  Motor  Car  Ins.  Co.    (1919)    287  111.  204; 

122  N.  E.-  489 27,100,101 

O'Leary  v.  St.  Paul  Fire  &  Marine  Ins.  Co.  (1917)— Tex.  Civ. 

App.— 196  S.  W.  575 110 

O'Neill  v.  Queen  Insurance  Co.  of  America  (1918)  230  Mass. 

269:  119  N.  E.  678 2,3 

Oakland  Motor  Car  Co.  v.  American  Fidelity  Co.  (1916)  190 

Mich.  74;   155  N.  W.   729 138,142 


TABLE  OF  CASES  189 

(REFERENCES  ARE  TO  SECTIONS) 

Section 

Orient  Insurance  Co.  v.  Van  Zandt-Bruce  Drug  Co.  (1915)  50 

Okla.  558;  151  Pac.  323 51,61 

Ouimet  v.  National  Ben  Franklin  Fire  Ins.  Co.  (1920)  56 

Dominion  Law  Rep.  501 95,98 

P 

Palatine  Ins.  Co.  of  London  v.  Commerce  Trust  Co.   (1918) — 

Okla.— 175  Pac.  930 85 

Palmer  v.  Bull  Dog  Auto  Ins.  Co.  Assn.  (1920)  294  111.  28; 

128  N.  E.  499 6. 11 

Parr,  Ex  Parte,  (1918)  82  Tex.  Crirrt  525;  200  S.  W.  404 152 

Pask  v.  London  &  Lancashire  Fire  Ins.  Co.  (1915)  211  111. 

App.  271 89,  98 

Patterson  v.  Adan  (1912)  119  Minn.  308;  138  N.  W.  281 130,132 

Patterson  v.  Standard  Accident  Ins.  Co.  (1913)  178  Mich.  288; 

144  N.  W.  491 117 

Phoenix  Assurance  Co.  v.  Epstein  (1917)  73  Fla.  991;  75 

So.  537 87, 88, 95, 99 

Preston  v.  Aetna  Insurance  Co.  (1908)  193  N.  Y.  142;  85  N.  E. 

1006 80 

Puget  Sound  Traction,  Light  &  Power  Co.  v.  Grassmeyer  (1918) 

—Wash.— 173  Pac.  504 155 

R 

Rabinowitz   v.  Vulcan   Insurance   Co.   (1917)   90  N.  J.   L.  332; 

100  Atl.  175 56 

Radice  v.  National  Fire  Ins.  Co.  (1920)  190  App.  Div.  893 100 

Reed  v.  St.  Paul  Fire  &  Marine  Insurance  Co.  (1915)  165  App. 

Div.  660;  151  'N.  Y.  Supp.  274 56 

Rock  Springs  Distilling  Co.  v.  Employers'  Indemnity  Co.  (1917) 

160  Ky.  317;  169  S.  W.  730 77,129 

Rouse  v.  St.  Paul  Fire  &  Marine  Ins.  Co.  (1920)— Mo.  App.— 

219  S.  W.  688 105 

Royal  Indemnity  Co.  v.  Schwartz  (1915) — Tex.  Civ.  App. — 

172  S.  W.  581 123, 130, 146 

Rush  v.  Boston  Insurance  Co.  (1914)  88  Misc.  48;  150  N.  Y. 

Supp.  457  90 

Rydestrom  v.  Queen  Insurance  Co.  of  America  (1921) — Md. — 

112  Atl.  586 96 

S 

St.   Paul   Fire    &    Marine   Ins.   Co.   v.   Huff    (1915)— Tex.    Civ. 

App.— 172  S.  W.  755 53,82 

Salo  v.  Pacific  Coast  Casualty  Co.  (1917)  95  Wash.  109;  163 

Pac.  384  152, 157 

Sare  v.  United  States  Fidelity  &  Guaranty  Co.  (1919)  50 

Dominion  Law  Rep.  573 45 

Schambelan  v.  Preferred  Accident  Insurance  Co.  (1916)  62 

Pa.  Super.  Ct.  445 142 

Schtnid  v.  Heath  (1912)  173  111.  App.  649 95 

Schmidt  v.  Schalm  (1913)  2  Ohio  App.  268 149,150 

Scranton  Gas  &  Water  Co.  v.  Weston  (1916)  63  Pa.  Super. 

Ct.  570  . ,  149 


190  AUTOMOBILE  INSURANCE  LAW 

(REFERENCES  ARE  TO  SECTIONS) 

Section 

Seessell  v.  New  American  Casualty  Co.  (1918)   140  Term.  253  204 

S.  W.  428 139 

Shaw  v.  Liverpool  &  London  &  Globe  Ins.  Co.  (1915)  16  Lacka- 

wanna  Jurist  288 65 

Sheridan  v.  Massachusetts  Fire  &  Marine  Ins.  Co.  (1918)  233 

Mass.  479;  124  N.  E.  249 3,  33 

Siegel  v.  Union  Assurance  Society  of  London  (1915)  90  Misc. 

550  92 

Singer  v'.  'Martin'  (i9i7) '  96 '  Wash.'  231 ;  'l64  'Pa'c'.'  iios! '.'.'.'.'.'.'.'.'.  '.152, 157 
Smith  v.  American  Automobile  Ins.  Co.  (1915)  188  Mo.  App. 

297;  175  S.  W.  115 49,51,56,57,58 

Solomon  v.  Federal  Insurance  Co.  (1917)  176  Cal.  133;  167 

Pac.  859  35,  51,  53,  55,  56 

Solomon  v.  New  Jersey  Indemnity  Co.  (1920) — N.  J. — 110  Atl. 

813  32 

Southern  Garage  Co.  v.  Brown  (1914)  187  Ala.  484;  65  So. 

400  74 

Springfield  Fire  &  Marine  Ins.  Co.  v.  Chandlee  (1913)  41  App. 

Cases  D.  C.  209 72a 

Springfield  Fire  &  Marine  Ins.  Co.  v.  Chero  Cola  Bottling  Co. 

(1918)— Ga.  App.— %  S.  E.  332 70 

Stafford  v.  Noble  (1919)  105  Kan.  219;  182  Pac.  650 150 

State  v.  Seattle  Taxicab  &  Transfer  Co.  (1916)  90  Wash.  416; 

156  Pac.  837 152, 153, 154 

Steinfield  v.  Massachusetts  Bonding  &  Insurance  Co.  (1920) 

— N.  H.— Ill  Atl.  303 121 

Stevens  v.  Stewart-Werner  Speedometer  Co.  (1916)  223  Mass. 

44;  111  N.  E.  771 73 

Stix  v.  Travelers  Indemnity  Co.  (1913)  175  Mo.  App.  171 ;  157 

S.  W.  870 18,108 

Stone  V.  American  Mutual  Auto  Ins.  Co.  (1921) — Mich. — 181 

N.  W.  973 27, 99 

Strawbridge  v.  Standard  Fire  Insurance  Co.  (1916)  193  Mo. 

App.  687  85 

Stuht  v.  Maryland  Motor  Car  Ins.  Co.  (1916)  90  Wash.  576; 

156  Pac.  557 87 

Stuht  v.  U.  S.  Fidelity  &  Guaranty  Co.  (1916)  89  Wash.  93; 

154  Pac.  137 107 

Sullivan,  Ex  Parte,  (1915)  77  Tex.  Crim.  72;  178  S.  W.  537 152 

T 
Taxicab   Motor   Co.   v.   Pacific   Coast   Casualty   Co.    (1913)    73 

Wash.  631 ;  132  Pac.  393 124, 127, 133 

Tincknell   v.    Ketchman    (1912)    78    Misc.   419;    139    N.    Y.    Supp. 

620    149, 150 

Traynor   v.  Automobile   Mutual   Insurance    Co.    (1921) — Neb. — 

181  N.  W.  566 51, 58,  59 

Turk  v.  Goldberg  (1920)— N.  J.  Eq.— 109  Atl.  732 157 

U 
Universal   Service   Co.  v.  American  Insurance   Co.   of   Newark 

(1921)— Mich.— 181  N.  W.  1007 104,  111 

Underwriters   at  Lloyds   Insurance   Co.  v.  Vicksburg  Traction 

Co.  (1913)   106  Miss.  244;  63  So.  455 .'...          73 


TABLE  OF  CASES  191 

(REFERENCES  ARE  TO  SECTIONS) 

Section 
Union  Marine  Insurance  Co.  v.  Charlie's  Transfer  Co.  (1914) 

186  Ala.  443;  65  So.  78 27,38,41,79 

Utterback-Gleason  Co.  v.  Standard  Accident  Insurance  Co.  of 
Detroit  (1920)  179  N.  Y.  Supp.  836;  affirmed  193  App.  Div. 
646;  184  N.  Y.  Supp.  862 14,137,138 

V 

Valley  Mercantile  Co.  v.  St.  Paul  Fire  &  Marine  Insurance 

Co.  (1914)  49  Mont.  430 ;  143  Pac.  559 88,  99 

Vulcan  Insurance  Co.  v.  Johnson  (1920) — Ind.  App. — 128  N.  E. 

664  72 

W 

Wampler   y.    British    Empire    Underwriters    Agency    (1920)    54 

Dominion  Law  Rep.  657 12,36,113 

Ward  v.  Teller  Co.  (1915)  60  Colo.  47;  153  Pac.  219 151 

West  v.  Asbury  Park  (1916)  89  N.  J.  L.  402 ;  99  Atl.  190 152 

Western  Indemnity  Co.  v.  Berry  (1918)— Tex.  Civ.  App.— 200 

S.  W.  245 156 

Western  Indemnity  Co.  v.  Murray  (1919) — Tex.  Civ.  App. — 

208  S.  W.  696 157 

Wetherill  v.  Williamsburgh  City  Fire  Insurance  Co.  (1915) 

60  Pa.  Super.  Ct.  37 109 

Wettengel  v.  U.  S.  "Lloyds"  (1914)  157  Wis.  433;  147  N.  W. 

360  , . . .  107 

White  v.  Home  Mutual  Insurance  Co.  (1920) — Iowa — 179  N.  W. 

315  53, 60, 66, 67, 78 

Williams  v.  Nelson  (1917)  228  Mass.  191;  117 'N.  E.  189 123,131 

Willis  v.  City  of  Fort  Smith  (1916)  121  Ark.  606;  182  S.  W. 

275  152 

Wilson  v.  Scottish  Insurance  Corp.  [1920]  2  Ch.  28;  89  L.  J. 

(Ch.)  329,  (1920)  W.  C.  &  Ins.  R.  107;  123  L.  T.  404;  [1920] 

W.  N.  169;  36  T.  L.  R.  545;  64  L.  J.  514 86a 

Wilson  Bryant  Co.  v.  Agricultural  Insurance  Co.  of  Watertown 

(1918)  171  N.  Y.  Supp.  218 43 

Wolff  v.  Hartford  Fire  Insurance  Co.  (1920) — Mo.  App. — 223 

S.  W.  810 43, 85, 86 

Wyker  v.  Texas  Co.  (1918)  201  Ala.  585;  79  So.  7 

Z 

Zackwik   v.    Hanover   Fire    Insurance    Co.    (1920) — Mo.   App. — 

225  S.  W.  135 24, 49, 85 


INDEX 

(REFERENCES  ARE  TO  SECTIONS) 

ABANDONMENT  OF  STOLEN  CAR  TO  INSURER 

Right  to  Make,  When 101 

ACCEPTANCE  OF  APPLICATION 

Necessity   For 5,  7, 11 

ACCIDENT,  NOTICE  OF,  TO  INDEMNITY  INSURER 

Necessity    For    141, 142 

Time    For    142 

Purpose   of    142 

Waiver  of    143 

ACCIDENT  POLICIES 

Distinction   Between  and   Collision   Policies.. 105 

ACTIONS.    See  Suits. 

ADDITIONAL  INSURANCE.     See  Other  Insurance. 

ADJUSTER 

Cannot  Delegate  Powers  Without  Express  Authority 34 

Cannot  Exceed  Powersi 34 

Extent  of  Authority   34 

Authority  to    Admit   Liability 36 

Effect  of  Insured 's  Refusal  to  Accept  Adjuster's  Estimate. ...  36 

Cannot  Waive  Defense  that  Loss  not  Covered  by  Policy 34,  36 

AGE  OF  DRIVER 

Violation  of  Statute  and  Policy  Provision 123 

Causative  Connection  with  Accident 123 

AGENT 

Authority  of  Local   

Limits   of    Authority    30 

For  Disclosed  Principal    

For   Undisclosed   Principal    32, 32 

As  Agent  for  Insured    

Waiver  of  Warranty  by  General  Agent 

Authority  to  Make  Entries  Required  by  Dealer's  Policy 

AGREEMENTS  TO  KEEP  CAR  INSURED 

Validity   of    

AID  IN  DEFENSE 

Of  Negligence  Action  Against  Insured 

AMBIGUITY 

Question  of  Law  for  Court 

AMBIGUOTT<3   PT  .MT«T^. 

Construed  in   "Favor  nf  Insured 1* 

Tn   Cnse  of  Hmn <*  Warranty   63 

In  Cases  of   Collision .107, 108, 109 

AMOUNT  OF  RECOVERY 

Under    Fire   Policies 84,  85,  86,  86a 

Under   Theft   Policies 102 

Under    Indemnity    Policies 

Attachment  Bond  Premium  not  Covered 145 

Insured 's  Costs  After  Failure  to  Defend  Suit 146 

193 


194 

(REFERENCES  ARE  TO  SECTIONS) 

APPEAL 

Effect  of  Indemnity  Insurer 's  Failure  to 139 

APPEAL  BOND 

Company 's  Duty  as  to 139 

APPLICATION 

Effect  of  Approval  of 5 

Necessity   for   Acceptance    of 5,  7, 11 

APPEAISAL.     See  Arbitration,  Appraisal  and  Award. 

APPEECIATION    IN    VALUE 86 

AEBITEATION,  APPEAISAL  AND  AWARD 

Eight  to  Appraisal  Waived  by  Denial  of  Liability 37 

Award  Merges  Eight  to  Action  on  Policy 

Appraisal  not  Barred  by  Total  Loss 

Bad  Faith  of  Appraisers  Invalidates  Award 

Evidence  Must  Clearly  Show  Bad  Faith 

Appraisers   Cannot   Impeach    Own   Award 40 

Failure  of   Appraiser   to   Sign   Award 

Effect  of  Eefusal  to  Arbitrate  on  Statutory  Penalties 

Parties   Need  not  Have  Notice  of  Appraisement 42a 

Proceedings    in    Appraisements 42a 

Sufficiency  of  Award 42b 

ASSIGNMENT  OF  CLAIMS  UNDEE  POLICIES 

When  Insufficient  as  Basis  of  Action 76 

ATTACHMENT 

Insufficient  Cause  of  Action    

Bond  Premium  not   Covered 145 

AWAED.     See  Arbitration,  Appraisal  and  Award. 

BAILEE 

Conversion    by    not    Covered 94 

BODILY  INJUEY 

Definition 

As  Affecting  Third  Person's  Eight  to  Eecover 131 

BONDS  FOE  OPEEATOES  OF  PUBLIC  SEEVICE  VEHICLES.-    See  Pub- 
lic Service  Vehicles  Bonds. 

BEOKEE 

Authority  to  Act  for  Insurer   Utf,  55 

Statements  of  Broker  as  Evidence  of  Agency 33 

Acts  not  Constituting  Broker  Insurer's  Agent. 33 

As  Agent   for   Insured 35 

BUEDEN  OF  PEOOF 

Of    Misrepresentations 49 

As  to  Eenting  and  Hiring  Warranties 65 

As  to  Value  of  Car  85 

As   to   Theft    99 

As  to  Collision 106 

CANCELLATION  OF  POLICY 

Necessity    for    Surrender 21 

Notice    of    Cancellation 21a 

Waiver  of  Condition  as  to  Eeturn  of  Premium 22 

Waiver  of  Cancellation  Provisions 23 


INDEX  195 

(REFERENCES  ARE  TO  SECTIONS) 

COLLISION  INSURANCE 

In    General    104 

Decisions  Lacking  in  Uniformity 104 

Collision  Defined  as   Striking  Against 109,  111 

Distinction  Between  Collision  and  Accident  Policies 105 

Collision   ' ' With    Any   Object" 106 

Eunning  Wheel  into  Hole  not  Collision 106 

Collapse  of  Wheel  from  Strain  After  Skidding  not  Covered.  .  .  .  106 

Collision  Need  not  be  With  Moving  Object 106 

Object  may  be  Horizontal,  not  Perpendicular 107,  111 

Contact  with  Water  held   Collision 107 

Collision  with  Object  Ejusdem  Generis  with  Automobile 107 

Ejusdem  Generis  Rule  not  Followed 108 

Upsets 

Recovery  Where  Collision  Precedes  Upsets 107 

Upset    not    Collision 107 

Roadbed 

What    it    Includes 108 

Curbing   Included   in    Roadbed 108 

Gutter   not   Included 108 

Fall  into  Elevator  Shaft  Covered 109 

Fall  of  Floor  on  Automobile  Not  Covered 110 

Fall  of  Steam  Shovel  on  Autotruck  Covered Ill 

' '  Entering  or  Leaving  Building ' '  Covers  Accidents  not  Caused 

by  Collision 109 

Violation  of  Law  by  Insured 112 

COMPROMISE.     See  Settlements. 

CONVERSION 

Usually    not    Covered    92 

May  be  Covered  by  Special  Contract 93 

by  Bailee  not  Covered 94 

Proof    of 93 

COSTS  OF  INSURED 

In  Defending  Action,  Liability  for 127 

After  Insurer 's  Failure  to  Defend  Suit 146 

COUNTER  OFFER 

To   Proposal 7 

COVERAGE 

Proof    of 7,  33 

CRIMINAL  PROSECUTIONS 

Not  Covered  by  Indemnity  Policies 117 

DEALERS'  POLICIES 

Reporting  Fire   Losses 81 

Special  Contract  Covering  Conversion    93 

DEDUCTIBLE  CLAUSE 

Effect   of 18 

DEMONSTRATION  OR  TESTING 

Exception  in   Indemnity  Policy 122 

DEPRECIATION   IN  VALUE 

Under    Valued   Policy 84,  85,  86 

Evidence  as  to    86 


196  AUTOMOBILE  INSURANCE  LAW 


"DERAILMENT" 

In    Transportation    Insurance 1H 

" ENTERING  OR  LEAVING  BUILDING" 

Accidents  not  Caused  by  Collision  Held  Covered 109 

ESTOPPEL 

As  to  Payment  of  Judgment. 126 

As  to  Notice  of  Accident 143 

By  Action  of  Adjuster 36 

EXPERT  EVIDENCE 

As  to  Meaning  of  "Demonstration  or  Testing" 122 

FAILURE  OF  INSURED 

To  Read  Policy  Immaterial 10 

FALL  OF  AUTOMOBILE 

Into  Stream  Covered   107 

Into  Elevator  Shaft  Covered 109 

Down  a  Hill  Followed  by  Collision  with  Tree,  not  Covered .         107 

FALL  OF  STEAM  SHOVEL 

On   Autotruck   Covered Ill 

FALSE  REPRESENTATIONS.     See  Representations  and  Warranties. 

FIRE  INSURANCE 

Fire    Originating    Within    Car 80 

Reporting  Fire  Losses  by  Dealers 81 

Certificate  for  Reporting  Fire  Losses 81 

Agent's  Agreement  to  Make  Entries  on  Certificates 81 

Care  of  Car  by  Insured  After  First  Fire 82 

Identification  of  Burned  Automobile 60 

GARAGE  WARRANTY.     See  Representations  and  Warranties. 

GARNISHMENT 

On  Judgment  Against  Insured 132 

HIRING  WARRANTIES.     See  Representations  and  Warranties. 

IDENTIFICATION 

Of   Burned    Automobiles 60 

INCUMBRANCES 

Breach  of  Provision  as  to,  Voids  Policy 72a 

Revival  of  Policy  on  Cancellation  of 72a 

INDEMNITY  INSURANCE 

In    General 

Defined    , 

Right  to  Issue   

Criminal  Prosecutions  not  Covered 

Use  of  Car  by  Third  Party  not  Covered 

Use  of  Car  by  Member  of  Owner's  Family  May  be  Covered 

Policies   Insuring  Partnerships 

Policies   Insuring    Partners 

Exception  of  Cars  Used  for  Demonstration  or  Testing 

Violation  of  Statute  and  Policy  Provision  as  to  Age  of  Driver. 

Violation  of  Speed  Ordinance 

Violation  of  Statute  as  to  Registration 

Liability  or  Indemnity 

Actual  Payment  of  Loss  by  Insured 126 


INDEX  197 

(REFERENCES  ARE  TO  SECTIONS) 

INDEMNITY  INSURANCE  (Continued) 

Actual  Trial  of  Issue 126 

Prevention  of  Payment  by  Insured 126 

Interest  Prior  to  Payment 126 

What  Constitutes  Payment  of  Judgment 127 

Condition  as  to  Payment  Prohibited  by  Statute 128 

Voluntary  Payment  by  Insured 129 

Eight  of  Injured  Person  to  Sue  Insurance  Company 130 

"Bodily  Injury"  Affecting  Third  Person's  Eight  to  Eecover. .  131 

Judgment  Debt  Eeached  by  Garnishment 132 

Aid  by  Insured  in  Defense  of  Negligence  Action 133 

Settlements    by    Insured    Without    Insurer's    Consent  \Eelease 

Insurer 1 134 

Insurer's  Eefusal  to  Accede  to  Compromise .135, 137 

Interference   with    Negotiations 136 

Interference   in    Suits 137 

Waiver   by   Insurer   of  Defence   by   Assuming   Control   of   Suit 

With  Knowledge  of  Facts 138 

Effect  of  Insurer's  Failure  to  Appeal 139 

Insurer    Cannot    be    Enjoined    from    Defending    Suit    Against 

Insured 140 

Necessity  for  Notice  to  Insurer  of  Accident 141, 142 

Time   for    Notice   of   Accident 142 

Purpose    of    Notice 142 

Waiver  of  Condition  as  to  Notice 142, 143 

Amount   of    Eecovery 144 

Attachment  Bond  Premium  not  Covered.  .  . 145 

Insured's  Costs  After  Insurer's  Failure  to  Defend  Suit 146 

Waiver  of  Condition  by  Insurer's  Officers,  Provision   Against.  147 

Effect  of  Settlement  by  Insurer  on  Eights  of  Insured 148 

Effect  of  Eef erences  to  Insurance  in  Negligence  Actions 149 

Eeferenees  to  Insurance  not  Cured  by  Instructions  to  Jury.  . .  .  150 

Eemarks  of  Counsel  in  Presence  of  Jurors. 150 

Eeference  First  Made  by  Defendant 151 

INJUEED  PERSON 

His  Eight  to  Sue  Insurance  Company 130 

"Bodily     Injury"     as     Affecting     Third     Person's     Eight     to 

Eecover .  131 

INSUEABLE  INTEREST 

Necessity    for 2 

INTEEFEEENCE  WITH  NEGOTIATIONS 

What  Constitutes 136 

INTEEFERENCE  IN  SUITS 

In  Indemnity  Insurance 137 

"JITNEY"  INSUEANCE.     See  Public  Service  Vehicle  Bonds. 

KNOWLEDGE  OF  LOSS 

By  Insured  Before  Eisk  Attaches 6 

LAECENY.     See  Theft. 

LIABILITY  OF  INSUEER.     See  Amount  of  Eecovery. 

LOSS,  Extent  of 

Expert    Testimony    Proper 43 

By  Theft 102 


198 

(REFERENCES  ARE  TO  SECTIONS) 

LOSS,  NOTICE  AND  PEOOFS  OF.     See  Notice  and  Proofs  of  Loss. 
MISREPEESENTATIONS.     See  Representations  and  Warranties. 

NEGLIGENCE  OF  INSURED 

Held  no  Defense  in  Action  on  Fire  Policy 78 

NEGOTIATIONS,   INTERFERENCE  WITH 

What  Constitutes    136 

NOTICE  AND  PROOFS  OF  LOSS 

Necessity   for 24 

Time   for    25 

Evidence  of  Receipt  by  Company 26 

Waiver   of 27 

Waiver  of  Question  for  Jury    28 

NOTICE  TO  INDEMNITY  INSURER  OF  ACCIDENT 

Necessity    for 141, 142 

Time   for    142 

Waiver   of    '. 142, 143 

ONE  FORM  OF  CLAUSE  CANNOT  BE  USED 

In  Construing  Another 16 

ORAL  CONTRACTS 

Necessity    for    Consideration     3 

Duration 3,  4 

Broker 's  Authority  to  Bind  Insurer  by   33 

OWNERSHIP 

What  Constitutes  Change  of 71 

Waiver    of    Conditions    as    to 72 

Misrepresentations   as   to   Will   Void   Policy 70 

See  also  Representations  and  Warranties. 

PARTNERS 

Indemnity  Policies  Insuring   121 

PARTNERSHIPS 

Indemnity  Policies  Insuring    120 

PAYMENT  OF  LOSS  BY  INSURED  UNDER  INDEMNITY  POLICY 

Necessity    for    126 

After  Actual   Trial  of  Issue    126 

Prevention    of    Payment 126 

Interest  Prior  to  Payment 126 

What  Constitutes   Payment   of   Judgment 127 

Statute   Prohibiting   Condition  fas   to    Payment 128 

Voluntary  Payment  by  Insured  not  Actual  Payment 129 

PILFERAGE.     See  Theft. 

PRACTICAL  CONSTRUCTION 

Of  Policy   by  Parties 15 

PRIOR  NEGOTIATIONS 

Policy  Cannot  be  Varied  by 9 

PROOFS  OF  LOSS.    6ee  Notice  and  Proofs  of  Loss. 

PUBLIC  SERVICE  VEHICLE  BONDS 

Requirement   by   Statute   or   Ordinance    Valid 152 

Immaterial  that  Bonds  may  be  Beyond  Reach  of  Some 153 


INDEX  199 

(REFERENCES  ARE  TO  SECTIONS) 

PUBLIC  SERVICE  VEHICLE  BOXDS   (Continued) 

Requirement    of    Surety    Company    Bond    or    Insurance    Policy 

Valid     154 

Liability  for  Lessee  or  Delegate  Operating  Vehicle 156 

Extent  of  Surety 's  Liability    157 

REFERENCES   TO  INSURANCE   IN   NEGLIGENCE  ACTIONS 

Constitute    Reversible^  Error 149 

Not  Covered  by  Instructions  to  Jury 150 

Remarks  of  Counsel   in  Presence  of  Jurors 150 

Objection  Must  be  Made  at  Trial 150 

Defendant  Cannot  Complain  if  References  First  Made  by  him ....      151 
REFORMATION  OF  POLICY 

Mistake  must  be  Mutual       19, 20 

REGISTRATION 

Violation  of  Statute  as  to 125 

RENEWAL  OF  POLICY 

A  New  Contract  11 

RENTING  WARRANTIES.     See  Representations  and  Warranties. 
REPAIRS 

Cost  of  as  Measure  of  Damages 44 

Contract  to  Repair  Supersedes  Contract  to  Pay  Loss 45 

Effect  of  Offer  to  Repair 45 

Time  Within  which  Offer  to  Repair  may  be  Made 46 

Liability   for   Delay   in   Repairs 47 

Liability   for   Depreciation   During   Repairs 47 

Evidence  as  to  Repairability 48 

In  Case  of  Theft 102 

"REPLACEMENT" 

Defined 44 

REPRESENTATIONS  AND  WARRANTIES 

In    General 49 

' '  Misrepresentations ' '   Defined    49 

Burden  of  Proof  of  on  Company 49 

Representations  Made  Warranties  by  Stipulation 50 

Intent    to    Deceive 52 

As  to  Cost 53 

May  be  Question  for  Jury 54 

Knowledge  by  Company's  Agent  of  Cost  Estops  Company  55 

As  to  Year  Model   56 

Good   Faith   of   Insured   Immaterial 57 

Effect  of  Inspection  by  Agent 58 

Materiality   may   be   for   Jury 59 

Where  Insurer  not  Deceived  to  his  Injury 59 

Materiality    of    Representations 51 

Burden    of    Proof   of,    on   Company 49 

Question  of  Law  or  Fact 51,  59 

How    Determined     51 

Renting  and  Hiring  Warranties 

Usually    Promissory    Warranties 61 

Breach   Avoids  Policy  Without  Provision  to   that  Effect.  .  61 

Breach  does  not  Merely  Suspend  Operation  of  Policy 61 

Eight  to  Return  of  Premium 61 


200  AUTOMOBILE  INSURANCE  LAW 

(REFERENCES  ARE  TO  SECTIONS) 

REPRESENTATIONS  AND  WARRANTIES    (Continued) 

Where  not  a  Promissory  Warranty 61 

Occasional  Use  for  Hire  Held  no  Breach 63 

Warranties  Apply  Both  to  Mortgagor  and  Mortgagee 62 

Effect  of  Statute  Abolishing  Warranties 64 

Violation  Usually  for  Jury 65 

Burden  of  Proof 65 

Location  of  Automobile 

Material  to  Contract '".  66 

Waiver    of   Location   Warranty 67 

' '  Private    Garage ' '    Defined 66 

Other  Insurance  Provision 

Breach  will  Prevent  Becovery 68 

Proof   of    68 

Does  Not  Necessarily  Forfeit  Policy 69 

Ownership 

Misrepresentations  as  to,   Will  Void  Policy 72 

What  Constitutes  Change  of 71 

Waiver  of  Condition  as  to 70 

DETENTION  OF  POLICY  BY  INSURED 

Effect    of    , 55 

Right  to  Issue  Indemnity  Insurance 116 

RIDER 

So  Declaring,  Will  Prevail  Over  Clauses  in  Policy 17 

Attachment  of  Wrong  Rider  by  Local  Agent 29 

"ROADBED."     See  Collision  Insurance. 

ROBBERY.     See  Theft. 

ROUTING 

Of  Public  Service  Vehicles  as  Affecting  Liability  Under  Bonds.  155 
SETTLEMENT  BY  INDEMNITY  INSURER 

Effect  on  Rights  of  Insured 148 

SETTLEMENTS  BY  INSURED 

Without   Insurer's  Consent  Release  Insurer       134 

Insurer 's  Refusal  to  Accede  to  Proposed  Compromise       135 

SETTLEMENTS,  VOLUNTARY 

By  Company  do  not  Estop  it  from  Denying  Liability 77 

SINKING 

Of   Ferryboat    113 

Of  Automobile  from  Ferryboat 113 

SPEED  ORDINANCE 

Violation   of    124 

"STRANDING  OR  SINKING" 

In    Transportation   Insurance    113 

SUBROGATION 

To  Claim  Against  Negligent  Third  Person 73 

Loss    Under    Theft    Policy.. 73,74 

Not  Affected  by  Judgment  for  Personal  Injuries 73 

Effect  of  Settlement  by  Insured 74 

Action  in  Insured 's  Name  for  Use  of  Insurer 74 

Where  Reimbursement  Partial 75 

Under   Indemnity   Policy 121 


INDEX  201 

(REFERENCES  ARE  TO  SECTIONS) 

SUITS 

Interference  in  by  Insured 137 

Insured  Waives  Defenses  by  Assuming  Control  of 138 

Knowledge  of  Facts 138 

Indemnity   Insurer   Cannot   be   Enjoined    from   Defending   Suit 

Against  Insured 140 

"SUITS" 

Term  does  not  Cover  Criminal  Prosecutions 117 

SURETY  COMPANY  BOND 

For  Public  Service  Vehicles,  Requirement  of  Valid 152, 154 

See,  also,  Public  Service  Vehicle  Bonds. 

TESTING 

Exception  in   Indemnity   Policy    122 

THEFT  INSURANCE 

Intent  to  Steal  Necessary  to  Make  Insurer  Liable 87,  88,  89 

Taking  Car  for  Joy  Ride  Merely  not  Covered 88 

Intent  Shown  by  Taking  Car  Out  of  State 89 

Theft  of  Equipment   . 89,  98 

Taking  by  Trick  or  Device  not  Covered  90 

Mere  Trespass  not  Theft    91 

Conditional  Sales    92, 93 

Special    Contract    with    Dealer    Covering    Conversion 93 

' '  Steal' '  may  be   Used  so  as  to   Cover   Conversion   by   Condi- 
tional  Vendee 93 

Conversion  by  Bailee  not  Covered 94 

What  Constitutes  Employment  with  Insured 95 

By  Person   in  Insured 's  Employment 95 

May   be    Question    for    Jury 95 

By  Person   in  Insured 's  Household 98 

Time   for  Reporting  Losses  by   Theft 97 

Waiver    of    Requirement 97 

Proof    of    Theft 99 

Cars    Recovered    after    Theft 100 

Insurer's  Right  to  Return  Found  Car 100 

Time  Within  Which  Found  Car  Must  be  Taken  Back 100, 101 

Extent  of  Loss  by  Theft   102 

Unauthorized  Change  in  Contract  Barring  Theft 

In   Certain   Places 103 

TRANSPORTATION  INSURANCE 

' '  Stranding   or   sinking" 113 

' '  Derailment"     114 

TRIAL  OF  ISSUE 

Payment  of  Loss  by  Insured  After 126 

UNAMBIGUOUS  POLICIES 

Construction    of 12 

Derailment  Clause  in  Transportation  Policy  Held  Unambiguous.  114 

UPSETS.     See  Collision  Insurance. 

USE  OF  AUTOMOBILE  IN  INDEMNITY  INSURANCE 

By  Third  Party    118 

By  Member  of  O^vrip r  '?  Famj  !y , 119 


202  AUTOMOBILE  INSURANCE  LAW 

(REFERENCES  ARE  TO  SECTIONS) 

VALUED  POLICIES 

Avoided    by    Gross    Overvaluation 83,  85 

As  Affected  by  Depreciation  in  Value 84,  85,  86 

Evidence  as  to  Depreciation 86 

VALUED  POLICY  LAWS 

Conclusive  Only  as  to  Value  at  Time  Policy  is  Written  Under 

Missouri    Statute 85 

VIOLATION  OF  LAW  BY  INSUEED 

In  Collision  Case 112 

VIOLATION  OF  SPEED  ORDINANCE 

Under    Indemnity    Policy 124 

VIOLATION  OF  STATUTE 

As  to  Age   of  Driver 123 

As   to    Eegistration 125 

VOLUNTAEY  SETTLEMENTS 

Do    not    Estop    Company 77 

WAIVEE 

Of  Eeturn  of  Premium  on  Cancellation 22 

Of   Cancellation   Provisions 23 

Of    Proofs    of    Loss.... 27,28 

By  Action   of   Adjuster 36 

Of  Eight  to  Appraisement    37 

Of  Location  Warranty 67 

Of  Provision  as  to  Change  of  Ownership 72 

As  to  Eeporting  Fire  Losses 81 

Of   Notice  of   Theft 97 

Of  Eeturn  of  Car  to  Place  Where  Stolen 100 

Of  Defense  by  Assuming  Control  of   Suit 138 

Of  Notice  of  Accidents  Under  Indemnity  Policies 142,  143 

Of  Conditions  in  Policy  by  Insurer's  Officers,  Provision  Against  147 

WAEEANTIES.     See  Bepresentations  and  Warranties. 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 

Los  Angeles 
This  book  is  DUE  on  the  last  date  stamped  below. 


JAN  2  4  1979 


PSD  1916     8/77 


SCHOOL  OF  LAW  LIBRARY 

UNIVERSITY  OF  CALIFORNIA 

LOS  ANGELES 


.^™  REGIONAL  LIBRARY  FACILITY 


A     000  699  429 


